ABSTRACT Based on Lambert, Leuz, and Verrecchia's (2007) derivation of the cost equity capital in terms expected cash flows, we generate a testable hypothesis that relates tax avoidance to firm's capital. Using three broad measures avoidance—book-tax differences, permanent book-tax long-run effective rates—to test our hypothesis, find is lower for tax-avoiding firms. This effect stronger firms with better outside monitoring, likely realize higher marginal benefits from savings, information...

ABSTRACT We examine whether internal governance affects the extent of real earnings management in U.S. corporations. Internal refers to process through which key subordinate executives provide checks and balances organization affect corporate decisions. Using number years retirement capture executives' horizon incentives using their compensation relative CEO influence within firm, we find that decreases with influence. The results are robust alternative measures various approaches used...

SUMMARY Using an international sample of firms from 31 countries, we study the relation between auditor quality and corporate tax aggressiveness. Employing indicator variable for aggressiveness when firm's avoidance measure is within top quintile each country-industry combination, find strong evidence that negatively associated with likelihood aggressiveness, even after controlling other institutional determinants such as home-country system characteristics. We also negative more pronounced...

ABSTRACT We examine the association between corporate tax aggressiveness and profitability of insider trading under assumption that profits reflect managerial opportunism. document purchase profitability, but not sales is significantly higher on average in more aggressive firms. also find positive attenuated for firms with effective monitoring accentuated a opaque information environment. In addition, we provide empirical evidence associated greater volume fiscal year prior to stock price...

Boards have an important role in ensuring that investors’ interests are protected. Our paper first examines whether the independence of a firm's board affects information asymmetry among investors. We provide evidence greater leads to lower asymmetry. Next, we more voluntary disclosure and analyst coverage two underlying mechanisms via which reduces Of mechanisms, find is significant influencing how Overall, our contributes better understanding effect on

SUMMARY This study examines whether the key audit matters (KAMs) disclosed in expanded reports as a part of recent regulatory reforms are informative for investors an emerging economy setting. Using adoption firms listed exclusively Mainland China, we find robust evidence that abnormal trading volume and earnings response coefficients higher stock price synchronicity is lower during postadoption than preadoption period. In additional tests, KAMs more non-state-owned enterprises, smaller...

This study examines whether key audit matters (KAMs) disclosed in expanded reports as a part of recent regulatory reforms are informative to investors the setting an emerging economy. Using adoption for firms listed exclusively Mainland China, we find robust evidence that abnormal trading volume and earnings response coefficients higher stock price synchronicity is lower during postadoption period than those preadoption period. In additional tests, some KAMs more nonstate-owned enterprises,...

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While prior studies have examined how investors perceive extreme forms of tax avoidance behavior such as sheltering and uncertain position (e.g., Hanlon Slemrod 2009; Wilson Koester 2011; Hutchens Rego 2012), there is little evidence on less avoidance. This study fills this void by examining the relation between firm's cost equity corporate using three measures that capture avoidance: book-tax differences, permanent long-run cash effective rates. We find aggressive significantly reduces a...

We examine whether the inclusion of general counsel in top management is associated with a firm's tax avoidance. find that firms as part team have lower GAAP effective rate, more uncertain positions, higher likelihood engaging shelter activities, and haven countries which firm reports significant subsidiary, relative to without management. In addition, we among management, avoidance greater when (1) has tax-related expertise, (2) hires an external auditor expertise or purchases services from...

In this study, we examine whether the social capital surrounding firm’s corporate headquarters mitigates managerial self-dealing in form of opportunistic insider trading. We find strong evidence that level region is negatively and significantly associated with trading profitability. also negative association between profitability more pronounced when governance weaker opacity higher, instances where insiders have greater opportunities to trade on their private information. Further analyses...

SYNOPSIS Using a broad sample of U.K. firms that are required to disclose auditor materiality thresholds under the International Standards on Auditing (United Kingdom and Ireland) 700, we examine whether threshold is associated with audit quality. We document lower higher quality, as measured by absolute discretionary accruals, accruals propensity just meet or beat analysts’ earnings expectations. also find some evidence negative association between quality attenuated when committee more...

ABSTRACT We investigate the effects of informal institutions on relationship between accounting-based risk measures and bank distress. conduct our analysis in two stages. In first stage, we extend prior literature by documenting a link distress during 2008–2009 financial crisis. particular, given environment characterized rapid growth innovation complex transactions to crisis, simple continue predict this crisis period. second address main research question related selected (societal trust,...

This paper investigates whether financial reporting conservatism is related to firms’ flexibility and their access capital. If facilitates monitoring governance by capital providers, they should be more willing extend financing increase However, because leads systematic understatement of net worth weakens the appearance balance sheet strength, it could also reduce study tests these two opposing views relationship between flexibility. Results indicate that firms with greater exhibit less in...

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Using an international sample of firms from 31 countries, we study the relation between auditor quality and corporate tax aggressiveness. indicator variable for aggressiveness when firm’s avoidance measure is within top quintile each country-industry combination, find strong evidence that negatively associated with likelihood aggressiveness, even after controlling other institutional determinants such as home-country system characteristics. We also negative more pronounced in countries where...

Using an international sample of firms from 32 countries, we study the relation between media independence and corporate tax aggressiveness. We measure by extent private ownership competition in industry. indicator variable for aggressiveness when firm's avoidance is within top quartile each country-industry combination, find strong evidence that associated with a lower likelihood aggressiveness, after controlling other institutional determinants, including home-country system...

We examine the association between corporate tax aggressiveness and profitability of insider trading under assumption that profits reflect managerial opportunism. document purchase profitability, but not sales is significantly higher on average in more aggressive firms. also find positive attenuated for firms with effective monitoring accentuated a opaque information environment. In addition, we provide empirical evidence associated greater volume fiscal year prior to stock price crash....

The SEC advises firms to release all material information in their earnings announcement press before corresponding conference call. Until May 2009, the NYSE went further by explicitly prohibiting disclosure of new a However, we document that S&P 500 firms, including those are NYSE-listed, disclose non-trivial amount management guidance exclusively calls. Firms challenging forecasting environments rely more on call, probably because call enables managers "flesh out" guidance. In contrast,...