Peer Pressure on Tax Avoidance: A Special Perspective from Firms' Fiscal Year-Ends

Lingxiang Li; Winkelman, Kenneth A.; D'Amico, Jeffrey R.
December 2014
Journal of Accounting & Finance (2158-3625);2014, Vol. 14 Issue 6, p171
Academic Journal
Considering the fact that more than 60% of U.S. firms' fiscal year-ends fall on December 31, we expect that the synchronicity of those firms' fiscal periods creates peer pressure among them. We hypothesize that this peer pressure induces tax avoidance behaviors. Using five tax avoidance measures from the literature, we find that those "December" firms consistently display more tax avoidance activities than "non-December" firms. Firms that change from non-December to December year-ends experience significant increases in their tax avoidance levels. Those results support our premise that the time-based peer pressure leads to firms' aggressive tax planning.


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