Date of Award

5-2018

Degree Type

Dissertation

Degree Name

Doctor of Business Administration (DBA)

First Advisor

Molly Mercer, PhD

Second Advisor

Ron Marcuson

Third Advisor

Matt Stern, PhD

Abstract

In this study, I investigate how news that a company has engaged in aggressive tax avoidance affects the company’s reputation. If the general public believes companies have a responsibility to pay their “fair share” of the national tax burden, then they will likely view aggressive tax avoidance negatively. If instead the public believes companies have a responsibility to shareholders to maximize profits by minimizing tax, then they will likely view aggressive tax avoidance positively. I examine these two possibilities by conducting an experiment. I find that people tend to view aggressive tax avoidance negatively and thus companies suffer reputational damage when the public learns that they engaged in these tax avoidance strategies. Within this experiment, I also investigate whether the degree of reputational damage depends on the company’s prior reputation and/or the specific tax strategy utilized. I find that neither prior reputation nor tax strategy’s legality consistently affect the amount of reputational damage. I conduct a second experiment that investigates whether tax professionals accurately anticipate these consequences. I find that tax professionals generally understand that such strategies result in reputational damage, but that they somewhat underestimate the degree of reputational damage experienced by tax-avoiding companies. My results have important implications for companies and their tax advisors as they weigh the benefits, costs, and risks associated with various tax strategies.

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