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Firms talk, investors listen, firm value tells: The influence of corporate tax-related political risk on investor valuation of corporate tax policy

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  • Gao, Bo

Abstract

This study investigates whether and how firm-level exposure to tax-related political risk, as disclosed in the earnings call, affects investor valuation of the corporate tax policy disclosed in the accompanying annual report. I find that investors value the more conservative corporate tax policy when firms disclose that their exposed tax-related political risk is high. I find that this association is more pronounced in situations in which investors would consider a higher GAAP ETR as the result of more conservative tax policy, rather than inefficient tax planning, such as when the managerial ability is high and when firms have high expected tax-related political risk.

Suggested Citation

  • Gao, Bo, 2025. "Firms talk, investors listen, firm value tells: The influence of corporate tax-related political risk on investor valuation of corporate tax policy," Finance Research Letters, Elsevier, vol. 86(PE).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pe:s154461232502032x
    DOI: 10.1016/j.frl.2025.108778
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    References listed on IDEAS

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