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Lisa De Simone

Other affiliations: Stanford University
Bio: Lisa De Simone is an academic researcher from University of Texas at Austin. The author has contributed to research in topics: Tax avoidance & Multinational corporation. The author has an hindex of 16, co-authored 48 publications receiving 811 citations. Previous affiliations of Lisa De Simone include Stanford University.

Papers
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Journal ArticleDOI
TL;DR: In this article, the adoption of IFRS by individual affiliates of multinational entities (MNEs) for unconsolidated financial reporting facilitates tax-motivated income shifting, and the authors find that the increase in the arm's length range of book profits reported by potential IFRS benchmark firms following affiliate adoption of FCA is statistically and economically significant, relative to pre-adoption and non-adopter affiliate years.

153 citations

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TL;DR: In this article, the authors examine the extent to which the reserve for unrecognized tax benefits consistently reflects uncertain tax avoidance and find significant variation in the tax accruals meant to represent uncertain tax positions.
Abstract: We examine the extent to which the reserve for unrecognized tax benefits consistently reflects uncertain tax avoidance. We analyze the financial statement disclosures for 19 paper companies that received a total of $6.4 billion in direct government subsidies structured as refundable excise taxes during 2009. Each of these companies included the refunds in financial income, but 14 of these firms excluded all or part of the refunds from taxable income. Despite the unprecedented nature of the exclusion, we find significant variation in the tax accruals meant to represent uncertain tax positions. Our evidence suggests that additions to the reserve for uncertain tax benefits are an inconsistent empirical measure of uncertain tax avoidance because of the wide latitude allowed managers in making judgments about tax uncertainties. Moreover, we find some evidence that these judgments are related to characteristics generally associated with weak corporate governance.

84 citations

Journal ArticleDOI
TL;DR: In this article, the authors extend prior approaches by explicitly considering unprofitable affiliates and test whether the association between losses and tax incentives for unProfitable affiliates deviates from the negative association observed in profitable affiliates, concluding that multinational firms alter the distribution of reported profits to take advantage of losses.
Abstract: Income shifting from high-tax to low-tax jurisdictions is considered a primary method of reducing worldwide tax burdens of multinational firms. Current losses also affect income shifting incentives. We extend prior approaches by explicitly considering unprofitable affiliates and test whether the association between losses and tax incentives for unprofitable affiliates deviates from the negative association observed in profitable affiliates. Results suggest that multinational firms alter the distribution of reported profits to take advantage of losses. Our point estimate for profitable affiliates implies that an increase of one standard deviation in the tax incentive, C, of an affiliate with an average return on assets of 13.3 is associated with a lower return on assets of 0.5 percentage points. The same change in tax incentive of an unprofitable affiliate is associated with an increase in its return on assets of approximately 0.7 percentage points, holding assets, labor, productivity, and other ...

80 citations

Journal ArticleDOI
TL;DR: In this paper, the authors propose that auditor-provided tax services (tax NAS) improve internal control quality by accelerating audit firm awareness of transactions material to the financial statements and find that companies purchasing tax NAS are significantly less likely to disclose a material weakness and that this result is not due to auditor independence impairment.
Abstract: We propose that auditor-provided tax services (tax NAS) improve internal control quality by accelerating audit firm awareness of transactions material to the financial statements. Using data from 2004 to 2012, we find robust evidence that companies purchasing tax NAS are significantly less likely to disclose a material weakness and that this result is not due to auditor independence impairment. A one-standard-deviation increase in tax NAS is associated with approximately a 13 percent decrease in the rate of material weaknesses relative to the base rate. These results are robust to tests addressing endogeneity concerns. Additional cross-sectional analyses reveal expected increased effects of tax NAS on internal control quality (1) after significant operational changes that require changes to the internal control structure, and (2) earlier in the relationship with the financial statement audit firm, when there are fewer established lines of communication between the audit team and client. This pap...

68 citations

Journal ArticleDOI
TL;DR: In this article, the authors propose that auditor-provided tax services (tax NAS) improve internal control quality by accelerating audit firm awareness of transactions material to the financial statements, and find that companies purchasing tax NAS are significantly less likely to disclose a material weakness and that this result is not due to auditor independence impairment.
Abstract: We propose that auditor-provided tax services (tax NAS) improve internal control quality by accelerating audit firm awareness of transactions material to the financial statements. Using data from 2004 to 2012, we find robust evidence that companies purchasing tax NAS are significantly less likely to disclose a material weakness and that this result is not due to auditor independence impairment. A one standard-deviation increase in tax NAS is associated with approximately a 13 percent decrease in the rate of material weaknesses relative to the base rate. These results are robust to tests addressing endogeneity concerns. Additional cross-sectional analyses reveal expected increased effects of tax NAS on internal control quality (1) after significant operational changes that require changes to the internal control structure, and (2) earlier in the relationship with the financial statement audit firm, when there are fewer established lines of communication between the audit team and client. This paper contributes to the knowledge spillover literature by identifying a mechanism through which tax NAS improve overall financial reporting quality.

55 citations


Cited by
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Journal ArticleDOI
TL;DR: In this paper, the authors investigate systematic changes in corporate effective tax rates over the past 25 years and find that the decline in effective tax rate is not concentrated in multinational firms, but occurs at approximately the same rate for both multinational and domestic firms.

281 citations

Journal ArticleDOI
TL;DR: The authors examined whether public disclosures of tax reserves recently made available through Financial Interpretation No. 48 (FIN 48) reflect corporate tax shelter activities and found that they do not reflect the aggressive nature of a firm's tax practices.
Abstract: We examine whether public disclosures of tax reserves recently made available through Financial Interpretation No. 48 (FIN 48) reflect corporate tax shelter activities. Understanding this relation is important to corporate stakeholders and researchers keen to infer the aggressive nature of a firm’s tax

269 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigate whether tax planning firms have a less transparent information environment and find that although tax planning provides expected tax savings, it can simultaneously increase the cost of information disclosure.
Abstract: We investigate whether aggressive tax planning firms have a less transparent information environment. Although tax planning provides expected tax savings, it can simultaneously increase th...

262 citations

Journal ArticleDOI
TL;DR: Based on Lambert, Leuz, and Verrecchia's (2007) derivation of the cost of equity capital in terms of expected cash flows, the authors generate a testable hypothesis that relates tax avoidance to a...
Abstract: Based on Lambert, Leuz, and Verrecchia's (2007) derivation of the cost of equity capital in terms of expected cash flows, we generate a testable hypothesis that relates tax avoidance to a...

234 citations