Cost behavior around corporate tax rate cuts

Research output: Contribution to journalArticleScientificpeer-review

10 Citations (Scopus)


In this study, we investigate cost behavior of companies in Organisation for Economic Co-operation and Development (OECD) member countries before corporate tax rate cuts become effective. We consider such events to generate strong incentives for intertemporal cost shifting. We analyze the time period between 2011 and 2016, which includes 32 tax reductions. The results show that companies exhibit income-decreasing selling, general, and administrative cost behavior before tax rate cuts, and that the extent is proportional to the magnitude of the decrease in the tax rate. Furthermore, we find stronger evidence of this form of tax-induced earnings management in lower tax compliance and code law countries, as well as for private companies.

Original languageEnglish
Peer-reviewed scientific journalJournal of International Accounting, Auditing and Taxation
Issue numberMarch
Pages (from-to)1-11
Number of pages11
Publication statusPublished - 15.01.2019
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • Cost behavior
  • Earnings management
  • Tax incentive
  • Tax reform

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance


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