Many conversations about business ethics involve the question of if something is legal, is it ethical?
This research study examines participants’ personal ethical beliefs about tax havens, tax avoidance, tax evasion.
To do so, we use a simplified version of the model from part two and allow for sequential auditing as well as for different types of taxpayers.
The possibility to learn something about the type of the taxpayer by auditing sequentially gives the authority a powerful tool to better target its detection effort.
In the third study, consistent with an agency theory of tax avoidance, evidence is presented suggesting tax avoidance results in a less timely annual earnings announcement.
Evidence is also presented suggesting that tax avoidance impacts the value-relevance of earnings to investors at the announcement date, evaluated by the earnings response coefficient ("ERC").
Biases in media sources can also affect a participant’s viewpoint of a company or person.
Companies and individuals should use this evidence in determining the harm of their reputation if there were to be a scandal involving tax avoidance strategies.