Unrecognized tax benefit and its impact on firms' financial activities: A longitudinal analysis

摘要

Our study investigates the unrecognized tax benefit (UTB) across firms and its impact on the firm's financial activities using the generalized estimating equations (GEEs). We find the UTB variation across firms is largely related to the firms' operation characteristics and firms with higher UTB balances are more likely to overstate their uncertain tax positions (UTPs). Also, we find that UTB balances are positively associated with firms' cash holding and employee stock compensation expenses. Our results provide evidence that UTB has become an important financial disclosure and have affected firms' financial operations.