Global tax enforcement policies have received increased attention since the financial crisis, with much stated focus on curbing perceived harmful tax practices of multinational corporations. Yet there is a dearth of evidence on possible differential effects of home‐country tax enforcement on multinationals. We take a step toward filling this void in the tax policy discussion by examining whether there is a differential relation between changes in home‐country enforcement and the tax avoidance of domestic versus multinational corporations. Using OECD data on 50 countries from 2005 to 2019, we find increases in home‐country enforcement are associated with lower levels of tax avoidance for domestic firms than for multinational corporations. Using a subset of firms from the Bureau van Dijk database, we find that multinationals avoid more tax in foreign countries when home‐country enforcement increases. Results are stronger for multinationals with a higher proportion of subsidiaries in low‐tax countries and when enforcement spending is low. These findings have implications for policy‐makers and highlight the importance of coordinated enforcement efforts across jurisdictions—such as the recently proposed global minimum tax—to successfully curb multinationals' worldwide tax avoidance.

This study examines the investment value of information provided by crypto-influencers, that is, social media influencers covering crypto assets on Twitter. We examine the returns associated with approximately 36,000 tweets issued by 180 of the most prominent crypto social media influencers covering over 1,600 crypto assets for the two years spanning through December 2022. Our primary results indicate that crypto-influencers’ tweets are initially associated with positive returns. However, these tweets are followed by significant negative longer-horizon returns, suggesting they generate minimal long-term investment value. These effects are most pronounced for tweets issued by crypto-influencers proclaiming to be crypto experts, for smaller cap crypto asset securities and for self-described experts with many Twitter followers. In an additional analysis, we use machine-learning methods to classify tweets and find that this pattern of results strengthens when the tweets have a more positive sentiment or relate to buy recommendations.

ABSTRACT This study examines whether financial accounting standards moderate the effectiveness of tax policy. Specifically, we examine whether myopic managers' focus on short-term financial reporting reduces the effectiveness of tax subsidies that incentivize innovation. We employ a novel setting, the issuance of Financial Interpretation No. 48 (FIN 48), which changed the financial reporting for some important, yet uncertain, tax incentives to innovate. For firms most affected by the standard change, we find evidence of reduced investment in innovation, reduced sensitivity of investment to tax incentives, and reduced future innovative output. Consistent with earnings myopia, we find the effect is more pronounced in firms with higher levels of transient institutional ownership and newly vesting equity compensation. These results indicate financial reporting myopia has real effects on innovation and can reduce tax policy effectiveness. The results further suggest that tax policymakers should consider both financial reporting and cash flow incentives in designing policy.

ABSTRACT We test whether tax avoidance strategies are associated with greater firm risk. We find that low tax rates tend to be more persistent than high tax rates and that measures of tax avoidance commonly used in the literature are generally not associated with either future tax rate volatility or future overall firm risk. Our evidence suggests that, on average, corporate tax avoidance is accomplished using strategies that are persistent and do not increase firm risk. We also find that the volatility of cash tax rates is associated with future stock volatility, suggesting that tax rate volatility and overall firm risk are related. JEL Classifications: M41.

ABSTRACT This study examines the impact of control systems on corporate innovation. Innovation is key to firm performance and growth, allowing corporations to stay competitive in their industry. We expect control systems to improve information flows within the firm by allowing managers to better identify and patent their most valuable intellectual property. Despite our prediction that control systems positively impact innovation, a priori, this relation is unclear as these same control systems may create an overly restrictive bureaucratic environment that may mitigate the benefits of effective controls for innovation. Using various measures of control system quality, we find evidence that effective control systems are associated with more innovation. Overall, the results of our study suggest effective control systems are associated with the ability of a firm to leverage its innovative projects. Our results suggest that corporations with effective control systems are more likely to be able to react to market and technology changes by ensuring their best ideas are patented.

ABSTRACT This study documents a spillover effect of accounting fraud by showing that after the revelation of accounting misconduct, there is an increase in financially motivated neighborhood crime (robberies, thefts, etc.) in the cities where these misconduct firms are located. We find that more visible accounting frauds (e.g., greater media attention and larger stock price declines) are more strongly associated with a future increase in financially motivated neighborhood crime. We also find that the association between fraud revelation and increased future financially motivated crime is strongest when local job markets are shallower and where local income inequality is high, consistent with adverse shocks from fraud putting pressure on local communities. Combined, our study provides evidence that the societal ramifications of corporate accounting misconduct extend beyond adversely impacting a firm's capital providers and industry peers to negatively influence the daily life of the residents in the firm's local community.

ABSTRACT We provide evidence about allocations of cash flow freed up by not paying taxes (“tax-related cash”). Uncertainty about future repayments suggests firms may use tax-related cash more cautiously than other cash flow. We utilize a flow-of-funds model from finance to quantify the relative amounts of tax-related cash associated with various potential uses of operating cash flow. We find firms allocate tax-related cash differently than other after-tax cash flow. Prior studies find tax avoiders hold more cash, and our results suggest this is because firms invest less (and save more) tax-related cash. We also find that the allocation of tax-related cash varies with relative financial constraints, economic uncertainty, and firms' multinational status in ways consistent with prior findings. For example, firms facing relatively higher levels of financial constraints invest a lower (higher) percentage of tax-related cash in capital expenditures (marketable securities and R&D), possibly to preserve funds for future investment opportunities. JEL Classifications: G31; H20.

ABSTRACT We examine the relations between tax avoidance and two components of firm risk (priced risk and idiosyncratic risk) using latent class mixture models. OLS regressions suggest that tax avoidance is negatively related to both priced risk and idiosyncratic risk. However, results from latent class mixture models reveal that 35.6 (58) percent of the sample exhibits a significant positive association between tax avoidance and priced (idiosyncratic) risk and firm characteristics are strikingly different across the latent classes. We use these differences to develop parsimonious models to predict latent class assignments, which we then use to demonstrate that firms predicted to have a positive relation between tax avoidance and priced risk or idiosyncratic risk have more negative future tax outcomes, including higher relative cash tax rate volatility, larger additions to tax reserves, larger payouts to tax authorities, and more negative tax-related news coverage over the following three years. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; G12; D81.

ABSTRACT We use data envelopment analysis (DEA) to develop a measure of effective tax planning that is theoretically aligned with the Scholes-Wolfson paradigm and captures how efficiently firms maximize after-tax returns given their operating, investing, and financing decisions. We then (1) document that the measure is associated with higher after-tax returns to provide assurance DEA achieves its objective in our setting, (2) demonstrate that the measure is incremental to cash ETRs in predicting after-tax returns, (3) validate the measure by showing its association with lower tax and non-tax costs, and (4) provide evidence that the measure captures something about taxes distinct from overall firm performance. This measure is useful to researchers given the known limitations of ETRs as a measure of tax planning. Data Availability: Tax Effectiveness values are available on the authors' websites.