计量经济分析 = Econometric analysis

Using a sample from 22 countries, I investigate the relations between the accuracy of analysts’ earnings forecasts and the level of annual report disclosure, and between forecast accuracy and the degree of enforcement of accounting standards. I document that firm-level disclosures are positively related to forecast accuracy, suggesting that such disclosures provide useful information to analysts. I construct a comprehensive measure of enforcement and find that strong enforcement is associated with higher forecast accuracy. This finding is consistent with the hypothesis that enforcement encourages managers to follow prescribed accounting rules, which, in turn, reduces analysts’ uncertainty about future earnings. I also find evidence consistent with disclosures being more important when analyst following is low and with enforcement being more important when more choice among accounting methods is allowed. ∗University of Toronto. I appreciate the helpful comments on various versions of this paper by Joel Amernic, Hollis Ashbaugh, Ray Ball (editor), Sudipta Basu, Jeff Callen, Bjørn Jørgensen, Peter Pope (referee), Beverly Walther, and participants at the 2001 EIASM Workshop on Accounting and Regulation, 2002 European Accounting Association Meeting, 2002 Journal of Accounting Research conference, 2002 Canadian Academic Accounting Association meeting, and 2002 American Accounting Association annual meeting. All errors are my own. I gratefully acknowledge the financial support of the Norwegian School of Economics and Business Administration. I thank IBES International Inc. for providing earnings forecast data.

Disclosure Practices, Enforcement of Accounting Standards, and Analysts' Forecast Accuracy: An International Study

We analyze survey responses from nearly 600 corporate tax executives to investigate firms' incentives and disincentives for tax planning. While many researchers hypothesize that reputatio...

Incentives for Tax Planning and Avoidance: Evidence from the Field

We use a shock to the public scrutiny of firm subsidiary locations to investigate whether that scrutiny leads to changes in firms’ disclosure and corporate tax avoidance behavior. ActionAid International, a nonprofit activist group, levied public pressure on noncompliant U.K. firms in the FTSE 100 to comply with a rule requiring U.K. firms to disclose the location of all of their subsidiaries. We use this setting to examine whether the public pressure led scrutinized firms to increase their subsidiary disclosure, decrease tax avoidance, and reduce the use of subsidiaries in tax haven countries compared to other firms in the FTSE 100 not affected by the public pressure. The evidence suggests that the public scrutiny sufficiently changed the costs and benefits of tax avoidance such that tax expense increased for scrutinized firms. The results suggest that public pressure from outside activist groups can exert a significant influence on the behavior of large, publicly traded firms. Our findings extend prior research that has had little success documenting an empirical relation between public scrutiny of tax avoidance and firm behavior.

Public Pressure and Corporate Tax Behavior

This study investigates the relation between corporate political connections and tax aggressiveness. We study a broad array of corporate political activities, including the employment of connected directors, campaign contributions, and lobbying. Using a large hand-collected data set of U.S. firms' political connections, we find that politically connected firms are more tax aggressive than nonconnected firms, after controlling for other determinants of tax aggressiveness, industry and year fixed effects, and the endogenous choice of being politically connected. Our findings are robust to various measures of political connections and tax aggressiveness. These results are consistent with the conjecture that politically connected firms are more tax aggressive because of their lower expected cost of tax enforcement, better information regarding tax law and enforcement changes, lower capital market pressure for transparency, and greater risk-taking tendencies induced by political connections.

https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2732&context=soa_research

Corporate Political Connections and Tax Aggressiveness

We extend research on the determinants of corporate tax avoidance to include the role of Internal Revenue Service (IRS) monitoring. Our evidence from large samples implies that U.S. public firms undertake less aggressive tax positions when tax enforcement is stricter. Reflecting its first-order economic impact on firms, our coefficient estimates imply that raising the probability of an IRS audit from 19 percent (the 25th percentile in our data) to 37 percent (the 75th percentile) increases their cash effective tax rates, on average, by nearly 2 percentage points, which amounts to a 7 percent increase in cash effective tax rates. These results are robust to controlling for firm size and time, which determine our primary proxy for IRS enforcement, in different ways; specifying several alternative dependent and test variables; and confronting potential endogeneity with instrumental variables and panel data estimations, among other techniques.

Do IRS Audits Deter Corporate Tax Avoidance

We extend research on the determinants of corporate tax avoidance to include the role of Internal Revenue Service (IRS) monitoring. Our evidence from large samples implies that U.S. public firms undertake less aggressive tax positions when tax enforcement is stricter. Reflecting its first-order economic impact on firms, our coefficient estimates imply that raising the probability of an IRS audit from 19 percent (the 25th percentile in our data) to 37 percent (the 75th percentile) increases their cash effective tax rates, on average, by nearly two percentage points, which amounts to a 7 percent increase in cash effective tax rates. These results are robust to controlling for firm size and time, which determine our primary proxy for IRS enforcement, in different ways; specifying several alternative dependent and test variables; and confronting potential endogeneity with instrumental variables and panel data estimations, among other techniques. JEL Classifications: M40; G34; G32; H25.

Using confidential data from the Internal Revenue Service on who signs a corporation’s tax return, we investigate whether the party primarily responsible for the tax compliance function of the firm — the auditor, an external non-auditor, or the internal tax department — is related to the corporation’s tax aggressiveness. We report three key findings: (1) firms preparing their own tax returns or hiring a non-auditor claim more aggressive tax positions than firms using their auditor as the tax preparer; (2) auditor-provided tax services are related to tax aggressiveness even after considering tax preparer identity, which supports and extends prior research using tax fees as a proxy for tax planning; and (3) Big Four tax preparers in particular are linked to less tax aggressiveness when they are the auditor than when they are not the auditor. Our findings help policymakers and researchers better understand an important feature of tax compliance intermediaries, particularly how the dual role via audits is related to observable corporate tax outcomes.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2603977_code361747.pdf?abstractid=2152538

The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness

Using confidential data from the Internal Revenue Service on who signs a corporation's tax return, we investigate whether the party primarily responsible for the tax compliance function of the firm—the auditor, an external non-auditor, or the internal tax department—is related to the corporation's tax aggressiveness. We report three key findings: (1) firms preparing their own tax returns or hiring a non-auditor claim more aggressive tax positions than firms using their auditor as the tax preparer; (2) auditor-provided tax services are related to tax aggressiveness even after considering tax preparer identity, which supports and extends prior research using tax fees as a proxy for tax planning; and (3) Big 4 tax preparers, in particular, are linked to less tax aggressiveness when they are the auditor than when they are not the auditor. Our findings help policymakers and researchers better understand an important feature of tax compliance intermediaries; particularly, how the dual role via audits ...

Using a survey of tax executives from multinational corporations, we document that some firms set their transfer pricing strategy to minimize tax payments, but more firms focus on tax compliance. We estimate that a firm focusing on minimizing taxes has a GAAP effective tax rate that is 6.6 percentage points lower and generates about $43 million more in tax savings, on average, than a firm focusing on tax compliance. Available COMPUSTAT data on sample firms confirm our survey-based inferences. We also find that transfer pricing-related tax savings are greater when higher foreign income, tax haven use, and R&D activities are combined with a tax minimization strategy. Finally, compliance-focused firms report lower FIN 48 tax reserves than tax-minimizing firms, consistent with the former group using less uncertain transfer pricing arrangements. Collectively, our study provides direct evidence that multinational firms have differing internal priorities for transfer pricing, and that these differences are strongly related to the taxes reported by these firms.

/pdf/transfer-pricing-strategies-practices-and-tax-minimization-49trqeovsu.pdf

Devan Mescall

Papers

Do IRS Audits Deter Corporate Tax Avoidance

Do IRS Audits Deter Corporate Tax Avoidance

The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness

The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness

Transfer pricing: strategies, practices, and tax minimization