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Tax risk and stock return volatility: case study for French firms

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  • Soufiene Assidi

Abstract

The purpose of this paper is to address the relationship between tax risk and the stock return volatility for listed French firms. The context of this research is the connection between accounting and taxation for listed French firms. This research is based on a sample of 40 French listed firms from 2009 to 2013; these companies are not from the financial sector. The result is consistent with the literature which suggests that tax risk activities increase a firm's risk. We find, also, that a positive relationship between the accruals and stock return is due to the managers' decisions to reduce the amount of tax rates by making favourable interpretations of tax laws. We find, also, a negative relationship between the debt and stock return and this is explained by the increase of debt representing a risk to the firm. In addition, this study can be the object of replications in other contexts. This paper's findings contribute to the sparse literature on tax risk and stock return volatility in French management practices. The findings could improve the management relationship between tax and accounting.

Suggested Citation

  • Soufiene Assidi, 2015. "Tax risk and stock return volatility: case study for French firms," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 6(2), pages 137-146.
    • Handle: RePEc:ids:ijbcrm:v:6:y:2015:i:2:p:137-146
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    Cited by:

    1. Knaisch, Jonas, 2022. "How to account for tax planning and tax uncertainty in valuation: Separate vs. composite view," arqus Discussion Papers in Quantitative Tax Research 271, arqus - Arbeitskreis Quantitative Steuerlehre.
    2. Soufiene Assidi & Khaled Hussainey, 2021. "The effect of tax preparers on corporate tax aggressiveness: Evidence form the UK context," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2279-2288, April.

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