We study how auditors prioritize tasks and how variations in task order influence auditors' performance. Drawing on conservation of resources theory, we develop and test our hypotheses through three experiments involving over 350 professional auditors. The first two experiments assess the impact of task order on performance. Across two settings, we manipulate task order and find that prioritizing an easier task generally results in lower performance compared with prioritizing a difficult task. In the third experiment, auditors are given autonomy over task ordering. We observe a tendency to prioritize easier tasks, particularly under heightened time pressure. We do not find any evidence that psychological ownership weakens the effect of time pressure on easy task prioritization.

Corporate tax avoidance is a recurring focus of policy‐makers, the media, activist groups, and researchers. This focus often centers on multinational enterprises' (MNEs) use of tax havens, with a wide body of research utilizing MNEs' tax haven use as evidence of corporate tax avoidance activities. However, the common assumption that MNEs operate in tax havens only for tax avoidance purposes overlooks the role tax havens play as homes for captive insurance entities, which allow firms to secure “self” insurance coverage but do not provide obvious differential federal tax benefits. When we remove the effect of captives on tax haven–based measures, we observe a roughly threefold increase in the magnitude of tax savings specifically associated with haven noncaptive activity. We document that nonfinancial firms' use of captive insurance occurs in approximately 11% of firm‐years and spans nearly all Fama–French 49 industries. We construct a haven captive use determinants model, with strong discriminatory power and compelling out‐of‐sample corroboration tests, that future research can employ to account for firms' use of haven captives. Our findings underscore the importance of separating captive and noncaptive‐related haven activities.

Downside risks are ubiquitous and can profoundly impact firm operations and valuation. Failure to adequately assess and manage target firms' downside risks hinders acquirers' ability to integrate and manage these businesses. This article introduces a novel measure of firms' downside risk similarity (DRS) based on risk factor descriptions and examines its implications for mergers and acquisitions (M&A) outcomes. We first validate that the measure is distinct from existing similarity measures and that it captures similarity in firms' potential significant downside. Using the new measure, we find that the market reacts more positively to deals in which acquirers and targets share more downside risks. Additional analyses show that this beneficial effect of DRS is driven primarily by risks that are idiosyncratic or firm‐specific, consistent with these risks requiring acquirers' relevant expertise to manage. Last, we document that in deals with more similar downside risks, the acquirers experience fewer risk profile changes and are less likely to suffer from adverse outcomes, such as deal‐specific goodwill impairment, divestitures, and significant profitability declines. Overall, we conclude that DRS plays a significant role in the M&A process.

Regulators are increasingly considering and mandating additional public tax disclosures to enhance transparency and promote scrutiny of corporate tax avoidance. We conducted three experiments to examine how such disclosures influence retail investors' perceptions of firms with identical effective tax rates but different tax avoidance methods. In the first experiment, participants evaluated whether firms were paying their fair share of taxes. We find that additional public tax disclosures reduce retail investors' tendency to differentiate between tax avoidance methods, subsequently affecting their willingness to invest. Specifically, participants use easy‐to‐process summary tax information in the additional public tax disclosure as a heuristic shortcut. The second and third experiments demonstrate that modifying the disclosure format and prompting participants to assess tax aggressiveness rather than fairness can mitigate these adverse effects. However, none of the cases significantly alters participants' perceptions compared to the baseline condition of no public tax disclosure. Overall, our findings provide insights into the design of, and the debate surrounding, additional public tax disclosures.