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Book-tax differences and risk: does shareholder activism matter?

Book-tax differences and risk: does shareholder activism matter?
Book-tax differences and risk: does shareholder activism matter?

We investigate the relationship between book-tax differences (BTD) and three specific types of risk, firm total risks, systematic risks, and idiosyncratic risks. In addition, we examine the moderating role of shareholder activism via institutional shareholders on these relationships and determine whether the identified relationships differ between the investigated specific types of risk. Using a large sample of Malaysian non-financial listed firms from 2013 to 2017, our findings are two-fold. First, we find a positive relationship between BTD and firm total risk, and between BTD and idiosyncratic risk. We also find that the weight of the BTD's impact on risk is significantly different between systematic and idiosyncratic risks. Second, we also find a significant moderating role of shareholder activism via institutional shareholders on the BTD's relationships with firm total risk and idiosyncratic risk. Our study contributes to the governance, risk, and tax literature by providing evidence showing that BTD can increase firm total and idiosyncratic risks. The impact of BTD on idiosyncratic risk is more pronounced than systematic risk where shareholder activism is steadily increasing. Our findings have important implications for tax authorities, fund managers, investors, and practitioners.

Book-Tax Differences, Institutional Shareholders, Malaysia, Risk, shareholder activism
1061-9518
Abdul Wahab, Nor
6f9e929b-e25f-482e-8452-491c40e6685a
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Ling, Tye Wei
042027a6-1797-4562-aa7d-fca3c99c5820
Shakil, Mohammad H.
4c72b5d8-ff24-4826-a61e-d23fa7ee61b9
Abdul Wahab, Nor
6f9e929b-e25f-482e-8452-491c40e6685a
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Ling, Tye Wei
042027a6-1797-4562-aa7d-fca3c99c5820
Shakil, Mohammad H.
4c72b5d8-ff24-4826-a61e-d23fa7ee61b9

Abdul Wahab, Nor, Ntim, Collins, Ling, Tye Wei and Shakil, Mohammad H. (2022) Book-tax differences and risk: does shareholder activism matter? Journal of International Accounting, Auditing and Taxation, 48, [100484]. (doi:10.1016/j.intaccaudtax.2022.100484).

Record type: Article

Abstract

We investigate the relationship between book-tax differences (BTD) and three specific types of risk, firm total risks, systematic risks, and idiosyncratic risks. In addition, we examine the moderating role of shareholder activism via institutional shareholders on these relationships and determine whether the identified relationships differ between the investigated specific types of risk. Using a large sample of Malaysian non-financial listed firms from 2013 to 2017, our findings are two-fold. First, we find a positive relationship between BTD and firm total risk, and between BTD and idiosyncratic risk. We also find that the weight of the BTD's impact on risk is significantly different between systematic and idiosyncratic risks. Second, we also find a significant moderating role of shareholder activism via institutional shareholders on the BTD's relationships with firm total risk and idiosyncratic risk. Our study contributes to the governance, risk, and tax literature by providing evidence showing that BTD can increase firm total and idiosyncratic risks. The impact of BTD on idiosyncratic risk is more pronounced than systematic risk where shareholder activism is steadily increasing. Our findings have important implications for tax authorities, fund managers, investors, and practitioners.

Text
Accepted_30_August_2021_BTD IO and risks manuscript_JIAAT - Accepted Manuscript
Restricted to Repository staff only until 30 August 2023.
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More information

Accepted/In Press date: 30 August 2021
Published date: September 2022
Additional Information: Publisher Copyright: © 2022 Elsevier Inc.
Keywords: Book-Tax Differences, Institutional Shareholders, Malaysia, Risk, shareholder activism

Identifiers

Local EPrints ID: 451118
URI: http://eprints.soton.ac.uk/id/eprint/451118
ISSN: 1061-9518
PURE UUID: afa52bb1-3a59-455c-b769-16b4f53ce011
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 08 Sep 2021 16:31
Last modified: 23 Jul 2022 01:27

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Contributors

Author: Nor Abdul Wahab
Author: Collins Ntim ORCID iD
Author: Tye Wei Ling
Author: Mohammad H. Shakil

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