This paper examines earnings management around the reduction in the corporate tax rate from 35% to 21% as enacted by the Tax Cuts and Jobs Act (TCJA) of 2017. Building on a theoretical model that considers a higher level of book-tax conformity of ‘real earnings management’ (REM) relative to...

We provide evidence of the final, immediate financial statement impact of some of the major provisions of the 2017 U.S. tax law changes, commonly referred to as the Tax Cuts and Jobs Act (TCJA). We also provide evidence on the accuracy of companies' estimates. Using hand-collected financial...

As part of the Tax Cuts and Jobs Act (TCJA), the US Congress repealed a long-standing exception that allowed companies to deduct executives’ qualified performance-based compensation in excess of $1 million. The purpose of this study is to examine whether Congress achieved its stated objective...

We examine whether option prices reflect investor taxes. Existing empirical option pricing literature ignores the potentially important impact of taxes. To assess the effect of investor taxes on option prices, we exploit a unique setting where “index” options on the S&P 500 Index (SPX) and...

Prior research finds that firms pay dividends prior to tax rate increases (“dividend acceleration”), especially when insider ownership is high (Hanlon and Hoopes 2014). However, this research does not consider the preferences of other investors, many of which are tax-insensitive. On average,...

A growing body of work examines market and firm responses to specific tax benefits. We extend this literature by examining market and firm reactions to an economically significant targeted tax refund granted to a few large, but poorly performing, steel firms by the Tax Reform Act of 1986...