Protection of trade secrets and corporate tax avoidance: Evidence from the inevitable disclosure doctrine



Ding, Rong, Sainani, Sushil ORCID: 0000-0002-1879-7869 and Zhang, Ziyang John ORCID: 0000-0003-1809-7093
(2021) Protection of trade secrets and corporate tax avoidance: Evidence from the inevitable disclosure doctrine. JOURNAL OF BUSINESS RESEARCH, 132. pp. 221-232.

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Abstract

In this study, we investigate the effect of the protection of trade secrets through the adoption of the inevitable disclosure doctrine (IDD) by US state courts on corporate tax avoidance. We suggest a positive impact of IDD adoption on tax avoidance, because IDD adoption reduces information transparency by increasing the benefit of nondisclosure and, hence, creates greater opportunities for firms to engage in more aggressive tax avoidance activities. Based on a large sample of US firms between 1977 and 2011, we find a significant increase in tax avoidance for firms in states that have adopted the IDD, compared with firms in states that have not adopted it. We further show that the impact of the IDD on corporate tax avoidance is more salient in firms with lower internal information quality. Our findings have important implications for both investors and regulators.

Item Type: Article
Additional Information: Source info: Journal of Business Research, Forthcoming
Uncontrolled Keywords: Trade secrets, Inevitable Disclosure Doctrine, IDD, Tax avoidance, Tax planning
Depositing User: Symplectic Admin
Date Deposited: 09 Mar 2021 08:27
Last Modified: 18 Jan 2023 22:57
DOI: 10.1016/j.jbusres.2021.03.042
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3116762