When do firms highlight their effective tax rate?

This study examines GAAP effective tax rate (ETR) visibility as a distinct disclosure choice in firms’ financial statements. By applying game-theory model for the voluntary strategies of firms, setting, we argue that firms face trade-off their ETR decisions. On one hand, have an incentive to enhance when ratio offers shareholders ‘favourable conditions’, example, higher expected after-tax cash flows. other favourable low could attract attention auditors and public ultimately result costs. We empirically test behaviour by examining relation between different conditions reflect stakeholder-specific costs benefits. While find unfavourable are not highlighted, observe ETRs (smooth, close industry average, decreasing ETRs). Additional analyses reveal this high is characteristic firm years with only moderately at usual levels, while extreme highlighted. Interestingly contrast our main results, subsample family does seem highlight ETRs.