No. 62: Does tax return disclosure affect information asymmetry among investors?

Jahr: 2021
Typ: Working Paper


Tax return information is often complex and difficult to interpret. Whether its public availability benefits unsophisticated users remains an empirical question. This study examines whether public disclosure of tax return information affects information asymmetry among more- and less- sophisticated investors. I investigate the unique setting of mandatory disclosure of three bottom-line income tax items in Australia. Using a difference-in-difference design with an entropy-balanced control group, I find evidence that information asymmetry decreased after the mandatory disclosure. The effect is more pronounced for firms with a poorer information environment, with higher individual ownership, and with lower media attention. The magnitude of the postdisclosure decline in the bid-ask spread correlates with the degree of the absolute book-tax gap of tax expense. This result is concentrated among firms with only mandatory disclosure—without any voluntary commitment or voluntary disclosure. Overall, the results suggest that public disclosure of tax return information does have the potential to reduce information asymmetry among investors.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin und der Goethe-Universität Frankfurt, die die gleiche Forschungsagenda verfolgen.

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