The Mitigating Effect of Financial Analyst Coverage on Tax Aggressiveness: Evidence from Brazilian B3-Listed Companies

Revista Catarinense da Ciência Contábil

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Site: http://revista.crcsc.org.br
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ISSN: 2237-7662
Editor Chefe: Rogério João Lunkes
Início Publicação: 30/11/2001
Periodicidade: Anual
Área de Estudo: Ciências Contábeis

The Mitigating Effect of Financial Analyst Coverage on Tax Aggressiveness: Evidence from Brazilian B3-Listed Companies

Ano: 2025 | Volume: 24 | Número: Não se aplica
Autores: Antonio Lopo Martinez, Lennilton Vianna Leal
Autor Correspondente: Antonio Lopo Martinez | [email protected]

Palavras-chave: financial analyst coverage, tax aggressiveness, information asymmetry, book-tax differences, effective tax rates, emerging markets

Resumos Cadastrados

Resumo Inglês:

This study examines the relationship between financial analyst coverage and tax aggressiveness among Brazilian companies listed on the B3 stock exchange from 2010 to 2021. Using the number of analysts covering a company as a proxy for information asymmetry, we investigate how analyst scrutiny influences corporate tax practices. Our analysis employs panel data regression on 110 non-financial companies, measuring tax aggressiveness through Book-Tax Differences (BTD) and Effective Tax Rates (ETR). We find that greater analyst coverage is associated with reduced tax aggressiveness—that is, increased analyst scrutiny correlates with lower BTDs and higher ETRs, indicating a reduction in aggressive tax planning practices. These results contrast with some recent findings in the Brazilian context but are largely consistent with international evidence. Robustness checks confirm that these associations hold after controlling for several firm-specific factors. This study contributes to the literature by providing empirical evidence from an emerging market and by employing a continuous measure of analyst coverage. While our results are limited to the Brazilian market, they underscore the critical role of financial analysts as external monitors. Further investigation in different market environments is needed to generalize these findings. Ultimately, our research highlights the importance of analyst coverage in mitigating information asymmetry and enhancing corporate accountability in tax reporting.