In this study we develop a measure of corporate tax avoidance that reduces both financial and taxable income, which we refer to as “book-tax conforming” tax avoidance. We use simulation analyses, LIFO/FIFO inventory method conversions, and samples of private and public firms, to validate our...

Prior research has separately examined pretax earnings management activities that have current taxable income consequences (book-tax 'conforming earnings management') and those that do not have current taxable income consequences (book-tax 'nonconforming earnings management'). Our study...

We investigate the association between aggressive tax and financial reporting and find a strong, positive relation. Our results suggest that insufficient costs exist to offset financial and tax reporting incentives, such that nonconformity between financial accounting standards and tax law...

The Sarbanes-Oxley Act of 2002 (SOX) is the most important legislation affecting corporate financial reporting enacted in the United States since the 1930s. Its purpose is to improve the accuracy and reliability of accounting information reported to investors. We examine stock price reactions to...

This study examines equity risk incentives as one determinant of corporate tax aggressiveness. Prior research finds that equity risk incentives motivate managers to make risky investment and financing decisions, since risky activities increase stock return volatility and the value of stock...

This paper provides evidence on the types of accounts that reveal earnings management activities. We build on Burgstahler and Dichev's (1997) evidence of earnings management to avoid an earnings decline and Phillips et al.'s (2003) findings that deferred tax expense can be used to detect such...

We examine the response of individual investors to firms' adoptions of SFAS 109–Accounting for Income Taxes. We predict SFAS 109 (as compared to APB 11) provides new decision-useful information, reducing the information disadvantage of individual investors relative to more sophisticated...

This study investigates whether private equity (PE) firms influence the tax practices of their portfolio firms. Prior research documents that PE firms create economic value in portfolio firms through effective governance, financial, and operational engineering. Given PE firms' focus on value...

A number of studies have examined the effect of public and private ownership on the cost of debt and conclude that the cost of debt of privately owned firms is higher, driven mainly by the poorer information environment in which these firms operate. We extend this strand of research in two ways....