Reputational risk of tax avoidance

REPUTATIONAL RISK OF TAX AVOIDANCE

Abstract
The data analysis for this paper was done using the year 2007 excel. The aim was to use various techniques to prove H1, H2 and H3. Ten UK based companies were utilized for this paper. The calculation is done separately to show the regression both before and after adverse media selection in September 2014.The analysis confirms that nearly all firms were affected by the unfavorable media attention. The methods used include regression, trends and change in stocks. The multiplier R is the correlation coefficient which indicates the strength of the linear relationship. The analysis proved hypotheses because nearly all the firms reported the decrease in stock prices during the period of adverse media attention. Comparing the change in stocks for the selected companies during and before the news on unfavorable media attention, one can observe the percentage changes in stock at this particular period. The research has proven the H1, H2 and H3.The research and analysis have confirmed that news about tax avoidance has an impact on reducing revenue for the following months. The hypothesis that News about tax avoidance hurts firm’s market performance is proven by both the trend in stock prices and change in companies’ inventory.
Key words: regression, stock prices, adverse, media attention, multiplier, hypothesis

Chapter 4: Analysis results
Regression analysis
Testing H1
A ten year period of ETR is compared against the income tax for the ten years.

The calculation is done separately to show the regression both before and after adverse media selection in September 2014.The regression covers all the selected companies. The regression results are shown below;
Aviva Company
For this company, the R multiplier before adverse media attention was 1.But after the September 2014 unfavourable news, the R multiplier for the company was 0.030275
The regression analysis for the companies’ data was done using excels data analysis.
Adverse media attention 2014 AVIVA After 2014 SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 3.88E+11 1.94E+11 #NUM! #NUM! Residual 0 0 65535 Total 2 3.88E+11         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 1.7E+113 1.7E+113
0.306655 61659.18 0 65535 #NUM! 61659.18 61659.18 61659.18 61659.18
0.531369 -1949038 0 65535 #NUM! -1949038 -1949038 -1949038 -1949038
0.079352 Before 2014 SUMMARY OUTPUT Regression Statistics Multiple R 0.030275 R Square 0.000917 Adjusted R Square -1.5 Standard Error 963011.2 Observations 1 ANOVA   df SS MS F Significance F Regression 6 3.4E+09 5.67E+08 0.00367 #NUM! Residual 4 3.71E+12 9.27E+11 Total 10 3.71E+12         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 0.403807 1.821138 0.080315 0.332392 0.349654 -92346.1 524019.7 -0.17623 0.868678 -1547258 1362566 0.626267 -39132.8 646002.1 -0.06058 0.954602 -1832722 1754457 0.008078 To test H1, a ten-year period of ETR will be calculated and a simple regression analysis used to compare income tax and ETR before and after adverse media attention.
GlaxoSmithKline
After the adverse media attention, the multiplier R for this company changed 1.However, before the news in September 2014; the R multiplier was to 0.922962.
After 2014
SUMMARY OUTPUT GlaxoSmithKline Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 8.15E+11 4.08E+11 #NUM! #NUM! Residual 0 0 65535 Total 2 8.15E+11         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 0.384681 -3209163 0 65535 #NUM! -3209163 -3209163 0.452295 5156286 0 65535 #NUM! 5156286 5156286 0.204636 Before 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.922962 R Square 0.851859 Adjusted R Square -1.5 Standard Error 702585 Observations 1 ANOVA   df SS MS F Significance F Regression 6 1.14E+13 1.89E+12 23.0013 #NUM! Residual 4 1.97E+12 4.94E+11 Total 10 1.33E+13         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 5E-284 5E-284
0.153302 -6E-298 6E-298
-0.29109 -6E-298 6.1E-298
0.290985 -4E-298 8.1E-298
0.41305 -4E-298 8.2E-298
0.281587 -8865.43 353098 -0.02511 0.981172 -989223 971491.8 -989223 971491.8
0.292386 -5833491 1216333 -4.79597 0.008674 -9210572 -2456411 -9210572 -2456411
0.028911 Next plc
After 2014
The multiplier R for Next Plc after the attention was 1.But before the adverse attention of September 2014, the R multiplier for this company was 0.286704.
SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 44180000 22090000 #NUM! #NUM! Residual 0 0 65535 Total 2 44180000         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 2.2E-298 2.2E-298
0.196026 1557361 0 65535 #NUM! 1557361 1557361 1557361 1557361
0.202488 -8527235 0 65535 #NUM! -8527235 -8527235 -8527235 -8527235
0.201385 Before 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.286704 R Square 0.082199 Adjusted R Square -1.5 Standard Error 8980.825 Observations 1 ANOVA   df SS MS F Significance F Regression 6 28894151 4815692 0.358243 #NUM! Residual 4 3.23E+08 80655212 Total 10 3.52E+08         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -1E-256 1.2E-256
0.236909 0 0
0.250733 65535 65535
0.272942 -3E-270 5.8E-270
0.279636 -4E-270 4.3E-270
0.295009 -176743 57412.58 -3.07848 0.036986 -336146 -17340.4 -336146 -17340.4
0.2895 121335.7 202721.4 0.598534 0.581728 -441509 684180.6 -441509 684180.6
0.307966 Compass group plc
The R multiplier for Compass Plc before the adverse media attention of September 2014 was 0.136604.The multiplier R after adverse media attention changed to 1.
After 2014
Compass group plc
SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 6.85E+08 3.42E+08 #NUM! #NUM! Residual 0 0 65535 Total 2 6.85E+08         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 1.7E+113 1.7E+113
0.249359 -5202855 0 65535 #NUM! -5202855 -5202855 -5202855 -5202855
0.241484 20224364 0 65535 #NUM! 20224364 20224364 20224364 20224364
0.243313 Before year 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.136604 R Square 0.018661 Adjusted R Square -1.5 Standard Error 60838.53 Observations 1 ANOVA   df SS MS F Significance F Regression 6 2.82E+08 46921406 0.076062 #NUM! Residual 4 1.48E+10 3.7E+09 Total 10 1.51E+10         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 3.4E-287 3.4E-287
0.398058 -5E+113 4.6E+113
0.225602 -7E-302 6.5E-302
0.269497 -2E-291 1.7E-291
0.269441 5E-257 5E-257
0.285899 -281611 290330 -0.96997 0.386989 -1087696 524474.7 -1087696 524474.7
0.298587 292570.6 1060836 0.275793 0.796369 -2652782 3237923 -2652782 3237923
0.287037 Reckitt Benckiser Group plc
The R multiplier for this company before adverse media attention was 0.038648. .But after the year 2014 adverse media attention, the R multiplier changed to 1.
After 2014 Reckitt Benckiser Group plc
SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 4.51E+09 2.26E+09 #NUM! #NUM! Residual 0 0 65535 Total 2 4.51E+09         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 4.4E-284 4.4E-284
0.210884 388653.1 0 65535 #NUM! 388653.1 388653.1 388653.1 388653.1
0.233083 -4061447 0 65535 #NUM! -4061447 -4061447 -4061447 -4061447
0.209692 Before year 2014.
SUMMARY OUTPUT Regression Statistics Multiple R 0.038648 R Square 0.001494 Adjusted R Square -1.5 Standard Error 156882.7 Observations 1 ANOVA   df SS MS F Significance F Regression 6 1.47E+08 24544729 0.005984 #NUM! Residual 4 9.84E+10 2.46E+10 Total 10 9.86E+10         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 4.9E-284 4.9E-284
0.099543 4.2E-257 4.2E-257
0.047918 4.2E-257 4.2E-257
0.155882 2.2E-298 2.2E-298
0.139394 -1E-292 1.1E-292
3.291317 -481800 73571.25 -6.54876 0.002811 -686067 -277534 -686067 -277534
0.183613 4214.387 54482.21 0.077353 0.942057 -147052 155481.2 -147052 155481.2
UBM plc
The multiplier R for UBM plc before the adverse media attention is 0.991435.But after the news, the multiplier R for this company changed to1.
After year 2014
SUMMARY OUTPUT UBM plc Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 1.01E+13 5.06E+12 #NUM! #NUM! Residual 0 0 65535 Total 2 1.01E+13         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0 0
0.208659 -563958 0 65535 #NUM! -563958 -563958 -563958 -563958
0.189842 -1.2E+08 0 65535 #NUM! -1.2E+08 -1.2E+08 -1.2E+08 -1.2E+08
0.228261 Before year 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.991435 R Square 0.982943 Adjusted R Square -1.5 Standard Error 7972637 Observations 1 ANOVA   df SS MS F Significance F Regression 6 1.47E+16 2.44E+15 230.5121 #NUM! Residual 4 2.54E+14 6.36E+13 Total 10 1.49E+16         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -6E-298 6.1E-298
0.099543 3738824 3738824
0.047918 65535 65535
0.155882 -4E-270 4.2E-270
0.139394 -4E-302 8.9E-302
3.291317 -2.1E+07 3738824 -5.71931 0.004625 -3.2E+07 -1.1E+07 -3.2E+07 -1.1E+07
0.183613 42036683 2768736 15.18262 0.00011 34349438 49723927 34349438 49723927
0.168892 Prudential plc
The multiplier R for prudential plc before the adverse news was 0.872065.The R multiplier changed to 1 after the media attention.
Before
Prudential plc
SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 2.31E+10 1.16E+10 #NUM! #NUM! Residual 0 0 65535 Total 2 2.31E+10         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 1.6E-270 1.6E-270
0.153975 976465.8 0 65535 #NUM! 976465.8 976465.8 976465.8 976465.8
0.155604 -8550310 0 65535 #NUM! -8550310 -8550310 -8550310 -8550310
0.18075 Before
SUMMARY OUTPUT Regression Statistics Multiple R 0.872065 R Square 0.760497 Adjusted R Square -1.5 Standard Error 260717.3 Observations 1 ANOVA   df SS MS F Significance F Regression 6 8.63E+11 1.44E+11 12.70127 #NUM! Residual 4 2.72E+11 6.8E+10 Total 10 1.14E+12         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -7E-302 6.5E-302
0.353506 0 0
0.310853 1.9E-253 1.9E-253
0.224299 7.3E-243 7.3E-243
0.30695 4.5E-242 4.5E-242
0.558184 -32957.7 249201.8 -0.13225 0.90117 -724853 658937.5 -724853 658937.5
0.811475 -1889394 530150.3 -3.56388 0.023504 -3361327 -417461 -3361327 -417461
0.338397 3I Group plc
The R multiplier for 3I Group before adverse media attention was 0.124945.After the news, the multiplier changed to 1.
After 2014
3I Group plc SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 0 0 #NUM! #NUM! Residual 0 0 65535 Total 2 0         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 2.4E-302 2.4E-302
-0.00197 -2000 0 65535 #NUM! -2000 -2000 -2000 -2000
0.002442 0 0 65535 #NUM! 0 0 0 0
0.002849 Before 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.124945 R Square 0.015611 Adjusted R Square -1.5 Standard Error 1529.027 Observations 1 ANOVA   df SS MS F Significance F Regression 6 148306.3 24717.71 0.063435 #NUM! Residual 4 9351694 2337923 Total 10 9500000       Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.17612 0.176124
0.031746 1.7E+113 1.7E+113
-0.00772 -411764 411764.2
0.015873 8.7E-245 8.7E-245
0.031447 -3E+113 3E+113
-0.00205 -4597.17 733.8333 -6.2646 0.003313 -6634.62 -2559.73 -6634.62 -2559.73
0.007194 12256.21 48662.2 0.251863 0.813558 -122852 147364.1 -122852 147364.1
0.002833 Burberry Group plc
The R multiplier for this company before the adverse Media attention was 0.718477.But after adverse media attention, the R multiplier changed to 1.
After 2014 Burberry Group plc SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 3125000 1562500 #NUM! #NUM! Residual 0 0 65535 Total 2 3125000         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 1.9E-253 1.9E-253
0.271277 -160398 0 65535 #NUM! -160398 -160398 -160398 -160398
0.243022 244412.4 0 65535 #NUM! 244412.4 244412.4 244412.4 244412.4
0.232794 Before 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.718477 R Square 0.516209 Adjusted R Square -1.5 Standard Error 31078.34 Observations 1 ANOVA   df SS MS F Significance F Regression 6 4.12E+09 6.87E+08 4.268039 #NUM! Residual 4 3.86E+09 9.66E+08 Total 10 7.99E+09         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -4E+120 -4E+120
0.260907 354681.8 -354682
0.274863 -476793 476792.6
0.281366 65535 65535
0.504819 1.7E+113 1.7E+113
0.68323 -127747 34920.75 -3.65819 0.021615 -224702 -30791.2 -224702 -30791.2
0.309147 171727.7 83123.95 2.065923 0.107727 -59061.4 402516.8 -59061.4 402516.8
Schroders The R multipliers for this firm changed from 0.418206 to 1 after the adverse media attention.
Schroders SUMMARY OUTPUT Regression Statistics Multiple R 1 R Square 1 Adjusted R Square 65535 Standard Error 0 Observations 1 ANOVA   df SS MS F Significance F Regression 2 19845000 9922500 #NUM! #NUM! Residual 0 0 65535 Total 2 19845000         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 2.4E-302 2.4E-302
0.2181 2629150 0 65535 #NUM! 2629150 2629150 2629150 2629150
0.206924 -1.3E+07 0 65535 #NUM! -1.3E+07 -1.3E+07 -1.3E+07 -1.3E+07
0.206452 Before 2014
SUMMARY OUTPUT Regression Statistics Multiple R 0.418206 R Square 0.174896 Adjusted R Square -1.66667 Standard Error 23384.93 Observations 1 ANOVA   df SS MS F Significance F Regression 5 3.48E+08 69549515 0.635905 #NUM! Residual 3 1.64E+09 5.47E+08 Total 8 1.99E+09         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 65535 65535
0.211844 -5E-242 5.2E-242
0.216034 -5E+113 5.3E+113
0.225759 1.6E-242 1.6E-242
0.106796 -57604.1 18881.1 -3.05089 0.055389 -117692 2483.949 -117692 2483.949
0.424938 -36165 45351.53 -0.79744 0.48348 -180494 108163.9 -180494 108163.9
0.759624 Testing H2
The trend in revenue growth rate is indicated below. Each company is analyzed separately using excel data analysis. The trend covers a period of 10 years.
2017 2016 2015 2014
Aviva plc 25,224,000 22,868,000 18,924,000 20,057,000
2013 2012 2011 2010 2009 2008 2007
20,623,000 21,157,000 28,091,000 36,274,000 34,690,000 34,642,000 29,312,000
Sales revenue

Date

Sales Revenue

Date
GlaxoSmithKline plc
Year 2017 2016 2015 2014 2013
GlaxoSmithKline plc 30,186,000 27,889,000 23,923,000 23,006,000 26,505,000
2012 2011 2010 2009 2008 2007
26,431,000 27,387,000 28,392,000 28,368,000 24,352,000 22,716,000
Sales revenue

Date
key year
1 2017
2 2016
3 2015
4 2014
5 2013
6 2012
7 2011
8 2010
9 2009
10 2008
11 2007
2017 2016 2015 2014 2013
Next plc 4,097,300 4,176,900 3,999,800 3,740,000 3,562,800
2012 2011 2010 2009 2008 2007
3,441,000 3,453,700 3,406,500 3,271,500 3,329,100 3,283,800
Sales Revenue

Date
Sales Revenue

Date
2017 2016 2015 2014 2013
Compass Group plc 22,852,000 19,871,000 17,843,000 17,058,000 17,557,000
2012 2011 2010 2009 2008 2007
16,905,000 15,833,000 14,468,000 13,444,000 11,440,000 10,268,000
Sales revenue

Date
Sales revenue

Date
2017 2016 2015 2014 2013
Reckitt Benckiser Group plc 11,512,000 9,891,000 8,874,000 8,836,000 10,043,000
2012 2011 2010 2009 2008 2007
9,567,000 9,485,000 8,453,000 7,753,000 6,563,000 5,269,000
Sales revenue

Date
Sales revenue

Date
2017 2016 2015 2014 2013
UBM plc 1,002,900,000 863,000,000 769,900,000 746,300,000 793,900,000
2012 2011 2010 2009 2008 2007
797,800,000 972,300,000 889,200,000 847,600,000 887,000,000 801,600,000
Sales revenue

Date
Sales revenue

2017 2016 2015 2014 2013
Prudential plc 36,961,000 35,506,000 32,033,000 29,844,000 29,404,000
2012 2011 2010 2009 2008 2007
25,277,000 24,568,000 20,299,000 18,789,000 18,188,000 13,530,000
Sales Revenue($)

Date
Sales Revenue ($)

Date
2017 2016 2015 2014 2013
3I Group plc 1,137,000 735,000 614,000 626,000 383,000
2012 2011 2010 2009 2008 2007
297,000 389,000 571,000 340,000 953,000 1,288,000
Sales revenue ($)

Date
Sales revenue

Date
2017 2016 2015 2014 2013
Burberry Group plc 2,766,000 2,514,000 2,523,000 2,329,000 1,998,700
2012 2011 2010 2009 2008 2007
1,857,200 1,501,300 1,279,900 1,201,500 995,400 850,300
Sales revenue ($)

Date
Sales revenue ($)

Date
2017 2016 2015 2014 2013
Schroders 2,546,900 2,203,700 2,055,800 1,957,500 1,838,800
2012 2011 2010 2009 2008 2007
1,468,200 1,518,300 1,501,700 1,042,300 1,304,100 1,136,500
Sales revenue ($)

Date

Sales revenue ($)

Date
Analysing the stock samples
The stock performance of the selected companies is analysed using excel data analysis. The analysis focuses on the period immediately before and after the news, which came in September 2014.Each Company is examined separately.
H3
Aviva plc
Stocks ($)

Date

Stocks($)

Date
GLAXOSMITHKLINE
Stocks($)
Date
NEXT PLC
Stock prices

Date
COMPASS GROUP
Stock prices

Date
RECKITT BENCKISER GROUP
Stock prices($)

Date
UBM
Stock($)

Date
PRUDENTIAL
Stock prices

Date
3I GROUP
Stock prices ($)

Date
BURBERRY GROUP
Stock price ($)

Date
SCHRODERS
Stock prices ($)

Date
H3.Analysis using P.B Ratio
The PB is the ratio of stock price to book value per share
PB=Stock price/book value per share
The study of the ten companies was done using excel data analysis. It involved two years; the year 2014 and year 2015.One can easily note the effects of adverse media attention towards the end of the year 2014.The trend for this effect is shown by the graphs below;
AVIVA
P.B ratio

Date
GLAXOSMITHKLINE – PRICE TO BOOK VAL
P.B ratio

Date
3. Next plc
P.B ratio

Date
4. Compass group plc
P.B ratio

Date
5. Reckitt Benckiser Group plc
P.B ratio

Date
6. UBM plc
P.B ratio

Date
7. Prudential plc
P.B ratio

Date
8. 3I Group plc
P.B ratio

Date
9. Burberry Group plc
P.B ratio

Date
10. Schroders
P.B ratio

Date
H3: Analysisng change in stocks for the companies during and before the September 2014 news. The formula for change in stock price is
Change in stock price = [(P2-P1)/ P1]*100%
The excel data analysis was used to compute the percentage change in stock prices.
AVIVA 8/1/2014 493.7 9/1/2014 516 10/1/2014 514 4.516913 GLAXOSMITHKLINE 1416.5 1460 1414 3.07095 NEXT PLC 6715 7185 6575 6.999255 COMPASS GROUP 959.01 987.57 997.09 2.978071 RECKITT BENCKISER GROUP 5097.15 5194.89 5185.11 1.917542 UBM 493.05 501.34 433.05 1.681371 PRUDENTIAL 1342.5 1449 1357 7.932961 3I GROUP 373.2 391.4 377.1 4.876742 BURBERRY GROUP 1411 1434 1476 1.63005 SCHRODERS 2329 2426 2404 4.164878 Chap 5 – discussion
Regression analysis
The regression analysis shows how well the data can fit in the model. The multiplier R is the correlation coefficient. It indicates the strength of the linear relationship. That means if R=1, the link in question is perfect. In case of the R=0, it implies no relationship between the two variables exists. Also, there is R2 which is the determinant coefficient. It indicates the number of points that fall in the regression line. For example, in case it is 90%. Therefore,90% of the y-variables which fall around the mean are explained by X variables. In such circumstance, one can conclude that the variables fit in the model.
The H1 in our case can be explained using regression results. The general regression equation used in this model would be Y=b1+b2x.But the data is specific to each company, and therefore, the equations were explained separately. But for our case, the essential part of the regression analysis is the R multiplier. The R multiplier is the correlation coefficient which indicates the strength of the linear relationship. There is a perfect correlation between the variables when the multiplier is 1 and no contact when the value is zero.
To test H1, a ten-year period of ETR will be calculated and simple regression analysis used to compare income tax and ETR before and after adverse media attention.
Aviva Company
For this company, there was no substantial relationship between the income tax and ETR before the adverse media attention of the year 2014.The multipliers R, for the regression between income tax and ETR before the year 2014 was 0.00302754.The fact that the multiplier is very small indicates that the company was not responsive to tax compliance. But after the year 2014 exposure, the multiplier raised to 1, meaning the relationship is now perfect. That means that ETR increases after the exposure. Therefore, the results indicate the elements of reputational risk.
GlaxoSmithKline
The regression analysis for this company proves the claim in H1.Before the 2014 media exposure, the multiplier R for the regression of income tax against ETR was 0.922962.The relationship is strong but not yet perfect. But after the adverse media attention of the year 2014, the multiplier R changed to 1, meaning after the media exposure, the relationship became perfect. The increase in R coefficient shows the elements of reputational risk.
Next Plc
After the 2014 media exposure, the regression multiplier R for this company was 1.Howevre, before this period, the R multiplier was 0.286704.That means, there was a perfect relationship between income tax and ETR after the exposure. Therefore, elements of reputation risk are evident.
Compass Group plc
The multiplier R for this company before the adverse media attention was 0.136604.Meaning at this period, the relationship was fragile. But after the year 2014, the R multiplier was 1, saying at this point. The association was perfect. Also, it indicates the increase in ETR variable. Therefore, the claim on the element of reputational risk is proven.
Reckitt Benckiser Group plc
Before the year 2014, the multiplier R for this company was 0.038648.But after the adverse media attention; the R multiplier changed to 1.The increase in ETR for this case indicates elements of reputational risk.
UBM plc
Before the year 2014, the multiplier R was 0.991435.The indicator here is that there is a strong correlation between income tax and ETR. But after the year 2014, the multiplier changed to 1, meaning the relationship was now perfect. Therefore, some elements of reputational risks are evident.
Prudential plc
Before the media exposure in the year 2014, the R multiplier for this company was 0.872065.But after the exposure, the R multiplier changed to 1.That means, the ETR increased leading to the change in the multiplier. Also, the relationship between income tax and ETR became perfect after this period. The element of reputational risk is evident for this company.
3I Group Plc
Before adverse media attention, the Multiplier R was 0.124945.But after the reports, the multiplier increased to 1.That means, the increase in ETR led to increase in multiplier R. Also, the perfect correlation between ETR and income tax after media attention shows elements of reputational risk to this company.
Burberry Group plc
This company also shows an element of reputational risk. The R multipliers before 2014 were 0.718477.However, after media attention, the multiplier increased to 1.The increase results from the rise in ETR, meaning there is an element of reputational risk for this company.
Schroder
The multiplier R for this company changed from 0.418206 before adverse media attention in the year 2014 to 1 after 2014.That means, after media attention, the relationship between ETR and income tax became stronger. Also, ETR increased, indicating elements of reputational risk.
Discussion of H2 results
H2, ten years sales revenue is collected. In this study firm’s growth performance is measured by the growth rate of income (model used by Chen et al. 2016). This will help give a good picture of firms’ growth over the years. However, during the year of adverse media attention for engaging in tax avoidance, if the substantial sales revenue decreases this would indicate that the firms suffered some reputational risk. This test will not consider worldwide revenue and will only focus on UK revenue.
The results involved the use of graphs and charts to show the 10-year trend in sales revenue. However, the focus was on the adverse media attention of September 2014.
Aviva plc
The curve shows a trend in sales revenue for Aviva plc from the year 2007 to 2017.The trend shows a decrease in sales revenue from the year 2010 to 2016.However, the lowest sales revenue were experienced in years 2015 and 2016.That means, immediately after adverse media attention of the year 2014, the aftermath was a reduction in sales revenue for the two years that followed. Therefore, the curve and trend prove the H2, which states that news about tax avoidance in a company affects its sales revenue adversely.
GlaxoSmithKline Plc
The graph for this company indicates an apparent drop in sales revenue for the year 2014.This drop is a result of adverse media attention. Therefore, the fall in sales revenue in 2014 proves the H2.
NEXT PLC
The sales revenues for this company were not much affected by the year 2014 media adverse media attention. The sales revenues continue to rise from the year 2012 to 2017.For this company, the H2 claims is refuted.
COMPASS GROUP
The effect of the year 2014 media attention is evident in this company. Initially, there was an uptrend in sales revenue, but from the year 2014, there is a slight drop in sales revenue until the year 2016 when the curve starts rising sharply again. That means adverse media attention resulted in falling in sales revenue, hence proving the H2.
RECKITT BENCKISER GROUP
Before the adverse media attention, there was the general uptrend in sales revenue for this company. However, after the year 2014 News, the sales dropped and started rising again in the year 2016.
UBM
The company shows a general downtrend in sales revenue after the year 2014 adverse media attention. However, the curve starts rising again from the year 2016.Therefore, there is a clear indication that news on tax avoidance resulted in a reduction in sales revenue for this company.
PRUDENTIAL
The sales revenue for this company is not affected by the media attention; there was a general uptrend in sales even after the year 2014 adverse media attention.
3I GROUP, BURBERRY GROUP, SCHRODERS
These three firms refute the claim in H2.they sales revenue for these firms are not affected by adverse media attention of the year 2014.Their sales revenue continues rising even after the year 2014 news concerning the tax avoidance for these companies.
Aviva Company
The stock prices for this company went down immediately after adverse media attention for the year 2014 September. Therefore, the H3 claim is evident for this company because the stock prices are negatively affected by the unfavourable media attention.
GlaxoSmithKline Plc
The curve shows the trend prices of stocks sales revenue for ten years. The trend shows a fall in stock prices from the year 2014 to the year 2016.Therefore, the year 2014 news on tax avoidance resulted in falling in stock prices for the next two years.
NEXT PLC
This company shows a general uptrend of stock prices from the year 2013 to 2016.However, the trend falls sharply in the year 2015.The sharp drop prices of stocks from the year 2015 came after the adverse media attention. Meaning, it resulted to decrease in prices of inventory for this company.
COMPASS GROUP
Even though there is a general uptrend stock price, for this company, there is a clear indication of fall in prices of stock from July 2014 and January 2015.The news came in in September 2014 and may have contributed to this drop.
RECKITT BENCKISER GROUP
The company does not show an evident drop. However, compared to the year 2013 and 2015, the stock prices for the year 2014 are lower. Therefore, the news on tax avoidance led to this general decrease in prices of stock for this period.
UBM
The stock prices for this company shows general downtrend from the year 2013.The implications adverse media attention on September 2014 concerning tax avoidance are evident. The news on tax avoidance contributes to this general downtrend in prices of inventory.
PRUDENTIAL
The company is not very much affected by the adverse media attention of the year 2014.But during this period, one can observe the prices of stocks compared to years 2013 and 2015.That means the news affected stock prices adversely in this period.
3I GROUP
The trend for this company begins from the year 2013 to the year 2017.The pattern shows low stock prices sales 2013 to 2016.However, the trend goes up from the year 2016.The low prices of stocks in this period may be a result of adverse media attention concerning tax avoidance.
BURBERRY GROUP
This company shows a sharp decrease in stock prices from the beginning of 2015 to end of 2016.Also, there is a general decrease in prices of stocks from the year 2013.There is also a sharp rise followed by a sharp fall in stock prices at the beginning of the year 2015.This general fall can be related to the 2014 adverse media attention.
SCHRODERS
The curve indicates the general trend in stock prices from the year 2013 to the year 2017.There is a decrease in prices of stock for this company from November 2014 but the trend changes in January 2015.At this point, the curve starts rising again. The 2014 news on tax avoidance affected the stock prices for this company, but the effect lasted for two to three months. Therefore, there, the effect proves the H2 hypothesis.
H3. From the trend on the P.B ratio, most of the ten companies were affected by the adverse media attention. The effect is shown by reduction in P.B ratio after the media attention. The Aviva, GlaxoSmithKline, Next plc and Burberry Group plc were profoundly affected by the news. They indicate the sharp decline in P.B ratio after the September 2014 tax avoidance news release. Others were also affected but not as much. One can see the P.B ratio for nearly all the ten selected UK companies started declining towards the end of the year 2014,therefore proving H3.
Analyzing change in stocks for the companies during and before the September 2014 news
company Change in stock price %
Aviva Company
4.51%
GlaxoSmithKline plc
3.07%
NEXT PLC
6.99%
COMPASS GROUP 2.98%
RECKITT BENCKISER GROUP
1.92%
UBM
1.68%
PRUDENTIAL
7.93%
BURBERRY GROUP
1.63%
SCHRODERS
4.16%
3I GROUP 4.88%
All the sampled companies indicate elements of reputational risk. There are changes in stock, meaning share prices were affected during the adverse media attention of the year 2014.Therefore, and all the companies indicate some elements of reputational risk.

Chapter 6 – conclusion
The analysis of the ten UK companies has proven H1, H2 and H3.The techniques used include regression analysis for income tax and ETR. Also, the simple trend in annual income for these companies was indicated using excel data analysis. The percentage change in stocks using the year 2013 as the base year was used to compute the change in stocks as a result of the year 2014.The year 2014 was used as a base year because the news on tax avoidance was reported during September 2014.
All the ten companies indicated perfect relationships with adverse media attention of September 2014.The multiplier R for all the companies changed from their initial values to 1 after the news. Therefore, there is clear evidence of reputation risk in both the firms. However, there were firms with quite a strong multiplier R before the announcement. For instance, UBM plc an R multiplier of 0.99 before this period. That means the firm was complying with tax revenues and hence the higher ETR. However, after the adverse media attention, this multiplier increases to 1.That means; compliance after the exposure was perfect. There were also other companies whose R multiplier was very small, indicating the relationship between the income tax and ETR for these firms was minimal. For example, Compass group plc had a multiplier of 0.13 before the media attention. The result for this multiplier changes to 1 after the adverse media attention. The low multiplier indicates that the firm was complying with taxes but in a minimal way. Otherwise, it was not concerned so much about the tax. The elements of tax avoidance before the news were very high. The exposure, in fact, results in future full compliance with the tax payment.
The H2 claim was measured using the growth in revenue for the ten –year period. However, the focus was on the September 2014 adverse media attention. In these companies, it is evident that the news resulted in a reduction in sales revenue. However, not all the companies supported this claim. There are other companies used which were not affected by the media attention. Examples of such companies are 3I GROUP, BURBERRY GROUP and SCHRODERS. Such firms did not suffer any reputational risks because their revenues were not affected by the adverse media attention of the year 2014.But if the revenues for these companies reduced at this period, one would assume that the firms fall hand in hand with the H2, which claim that adverse media attention results to a reduction in sales revenues. Therefore, one can conclude that not all firms prove the hypothesis. There is those whose revenue fall after adverse media attention like Aviva plc, GlaxoSmithKline plc among others. However, some firms were not responsive to these reports about tax avoidance. In fact, their sales revenues were not affected.
The change in stock prices, especially at the time when the tax avoidance issue is reported, was essential for this research. During this period, it was anticipated that the stock prices for the companies would go down. The fall in stock prices would be an implication of tax avoidance claims which usually affect the performance levels of various companies negatively. The analysis proved these hypotheses because nearly all the firms reported the decrease in stock prices during the period of adverse media attention. The tax avoidance news was captured during September 2014(Gallemore, Maydew, Thornock, 2014, N.p).Most of the firms, as indicated by the trend, was negatively affected. Their stock prices went down. The drop proves the H3 claim.
Comparing the change in stocks for the selected companies during and before the news on adverse media attention, one can observe the percentage changes in stock at this particular period. My companies were more affected than others. For instance, Next plc stocks changed by 6.99%, Prudential at 7.93%, 3I group at 4.88%.These were companies which experienced the highest change in stocks during the period of adverse media attention. However, there are others that had minimal changes in stock prices compared to previous years during the news. The UBM stocks changed by 1.68%, Burberry group at 1.63%, Reckitt Benckiser group at 1.92%.These changes prove the H3 because they indicate the changes in stocks which resulted from the year 2014 news on tax avoidance by various companies.
The research has proven the H1, H2 and H3.The research and analysis have proven that news about tax avoidance has an impact on reducing revenue for the following months. However, the study is limited to UK firms on not worldwide. Also, there is a clear indication that news about tax avoidance would result in higher future income and thus increase ETR. The regression analysis proves this claim. Actually, all the companies substantiated this claim. After September 2014, the R multiplier for regression became perfect (1), indicating how useful the snews was to these companies. Finally, the claim that News about tax avoidance has a negative impact on firm’s market performance is proven by both the trend in stock prices, percentages and P.B ratio. According the three analyses, the adverse media attention resulted in decline in market performance for the companies.

References
Gallemore, J., Maydew, E.L. and Thornock, J.R., 2014. The reputational costs of tax avoidance. Contemporary Accounting Research, 31(4), pp.1103-1133.