Do Investors Use Prior Tax Avoidance when Pricing Tax Loss Carryforwards?
研究发现投资者对新增税收损失结转的估值会因企业先前的避税行为而异，避税行为信号表明企业产生应税收入以利用税收损失结转的能力。
ABSTRACT The Internal Revenue Code allows firms to carry excess tax losses forward to offset future taxable income and reduce taxes. Consistent with tax loss carryforwards (TLCFs) creating a significant asset, prior research finds that investors positively value TLCFs. However, investors face significant uncertainty about whether firms will have sufficient future taxable income to benefit from TLCFs. We hypothesize that investors' valuation of new TLCFs will vary with firms' prior tax avoidance behavior because it signals firms' abilities to generate taxable income to offset TLCFs through tax planning. We confirm that investors assign a positive value to new TLCFs and find that investors' valuation varies with firms' prior tax avoidance behavior. Investors positively value TLCFs when firms exhibit high variability in prior tax avoidance and high levels of prior tax avoidance. Our results are incremental to the effect of changes in the valuation allowance on investors' valuation of new TLCFs. JEL Classifications: M40; M41; M49. Data Availability: Data used in this study are available from public sources identified in the paper.