Installment sales, Deferred revenue, Deferred Taxes, Installment reporting

Usually, installment reporting of deferred payment sales for tax purposes will result in deferral of income tax. This note is concerned with the effects of such tax deferral on company profitability and on the flow of funds under varying conditions of sales growth and terms. It is commonly recognized that, with other variables constant, installment sales are growing. However, when sales decline or stabilize following a period of growth, the result is, respectively, the reverse or neutral. Precisely the same pattern was noted in association with tax deferrals achieved by use of accelerated depreciation for tax reporting in company with growing, declining, or stable capital expenditures by a firm.' So far as we know, however, the impact of deferrals resulting from installment reporting upon the present value of company profit flows has never been made explicit. Moreover, profit margins and length of payment terms as well as growth of sales significantly affect the pattern of fund flows associated with deferrals originating from installment reporting. Normative prescriptions are not offered here. Rather, implications of the analysis are left to be read by the wide variety of persons directly concerned in policy contexts, including members of the accounting profession involved in the attempt to reach a consensus with respect to ac-

ABSTRACT Substantial evidence suggests that regulatory agencies in the United States can be captured by the politicians who oversee them. We provide novel evidence of a federal agency in which capture is limited: the United States Patent and Trademark Office. Although patent applications from politically connected applicants are slightly more likely to be approved despite being of lower ex post quality, additional analyses suggest these outcomes are not indicative of capture. In particular, the disclosure quality of connected patents' legal claims increases more than unconnected patents during the review process, narrowing the scope of the patents and constraining the intellectual property rights. Furthermore, connected patents are no more likely than others to be litigated ex post, suggesting these patent grants are not spurious. Our findings provide insights into how the design of a regulator can limit the benefits that accrue to politically connected firms.

ABSTRACT This paper examines the consequences of powerful political connections for local governments. We find that governments located within the constituencies of, and thus connected to, powerful congressional members reduce their stewardship over public resources. Using plausibly exogenous declines in the power of congressional representation, we show that the effect is causal. To better understand why connected local governments can reduce stewardship, we study electoral characteristics. Our findings suggest that the increased resources that come with powerful congressional representation allow local‐government officials to reduce stewardship without material adverse effects on their reelection prospects. In sum, we provide evidence of a cost of political connections: they weaken local governments' incentives to act in a socially optimal manner.

ABSTRACT Antitrust regulators play a critical role in protecting market competition. We examine whether the political process affects antitrust reviews of merger transactions. We find that acquirers and targets located in the political districts of powerful U.S. congressional members who serve on committees with antitrust regulatory oversight receive relatively favorable antitrust review outcomes. To establish causality, we use plausibly exogenous shocks to firm–politician links and a falsification test. Additional findings suggest congressional members’ incentives to influence antitrust reviews are affected by three channels: special interests, voter and constituent interests, and ideology. In aggregate, our findings suggest that the political process adversely interferes with the ability of antitrust regulators to provide independent recommendations about anticompetitive mergers.

ABSTRACT We present the first comprehensive descriptive evidence on the labor market and personal consequences for audit professionals in the United States who are named in SEC or PCAOB enforcement actions. Three key findings emerge. First, between 38% and 73% of culpable auditors depart from their firms within one year after the enforcement event. These departure rates are three to four times higher compared with a sample of non‐culpable auditors. Second, 83% of culpable auditors departing from Big 4 accounting firms exit the profession, compared with 58% of a departing non‐culpable comparison group. In contrast, about 77% of the culpable auditors leaving non–Big 4 accounting firms remain in public accounting, compared with 51% of a departing non‐culpable comparison group. Third, using novel data on personal real estate holdings, we find that culpable auditors do not appear to engage in markedly different transactions around enforcement compared with a comparison sample of non‐culpable individuals.