This discussion reflects on the state and future of empirical tax research in accounting, complementing and extending the work of Shackelford and Shevlin ( J. Acc. Econom. 31/32 (2001)). Specifically, this discussion (1) examines the scope of Shackelford and Shevlin (J. Acc. Econom. 31/32 (2001)), (2) discusses what I view to be the main contributions and limitations in the extant tax research, and (3) charts several directions for future research.

We investigate the role of book-tax conformity in firms' financial reporting activities using a unique set of publicly traded firms that were forced to switch for tax purposes from the cash method to the accrual method. Prior to the mandated change, little trade-off existed between tax planning and financial reporting goals for these firms. After the change, recognition criteria for tax and financial reporting purposes became more alike, increasing the trade-off between financial reporting and tax objectives. Our results suggest that required use of the accrual method for tax purposes causes firms to defer income for financial statement purposes.

This paper estimates the magnitude of tax costs and their impact on the decision to divest assets via a taxable sale rather than a tax-free spin-off. We find that the tax costs are substantial, averaging 8% of market value of the divested assets, and that cross-sectional variation in tax costs has a large impact on managers’ choice of divestiture method. Our results are consistent with two explanations. First, managers are willing to incur avoidable tax costs to gain earnings and cash flow benefits. Second, managers choose taxable sales because the acquisition premia on the sales exceed the avoidable tax costs.

This paper investigates systematic changes in the value-relevance of earnings and book values over time. We report three primary findings. First, contrary to claims in the professional literature, the combined value-relevance of earnings and book values has not declined over the past forty years and, in fact, appears to have increased slightly. Second, while the incremental value-relevance of ‘bottom line’ earnings has declined, it has been replaced by increasing value-relevance of book values. Finally, much of the shift in value-relevance fiom earnings to book values can be explained by the increasing frequency and magnitude of one-time items, the increasing frequency of negative earnings, and changes in average firm size and intangible intensity across time.

Increasing the conformity between accounting earnings and taxable income has been proposed to improve financial reporting and curtail aggressive tax planning. We find, however, that increasing conformity results in earnings that are less informative. Our inquiry exploits a unique sample of firms forced to change from the cash method to the accrual method for tax purposes, thereby increasing their book-tax conformity. We find that these firms experienced a decrease in earnings informativeness compared to control firms unaffected by the change. To our knowledge, this is the first evidence of tax law changes affecting the informativeness of accounting earnings.

We describe the taxation landscape in the cryptocurrency markets, especially concerning U.S. taxpayers, and examine how recent increases in tax scrutiny have led to changes in crypto investors' trading behavior. We argue conceptually and then empirically document that increased tax scrutiny leads crypto investors to utilize conventional tax planning with tax-loss harvesting as an alternative to non-compliance. In particular, domestic traders increase tax-loss harvesting following the increase in tax scrutiny, and U.S. exchanges exhibit a significantly greater amount of wash trading. Additional findings suggest that broad-based and targeted changes in tax scrutiny can differentially affect crypto traders’ preference for U.S.-based exchanges. We also discuss other gray areas for tax regulation related to new crypto assets, such as Non-Fungible Tokens and Decentralized Finance protocols, that further highlight the importance of coordinating tax policy and other regulations.

This study examines whether the information content of earnings announcements – abnormal return volatility and abnormal trading volume – increases in countries following mandatory IFRS adoption, and conditions and mechanisms through which increases occur. Findings suggest information content increased in 16 countries that mandated adoption of IFRS relative to 11 that maintained domestic accounting standards, although the effect of mandatory IFRS adoption depends on the strength of legal enforcement in the adopting country. Utilizing a path analysis methodology, we find evidence of three mechanisms through which IFRS adoption increases information content: reducing reporting lag, increasing analyst following, and increasing foreign investment.