We hypothesize that prior evidence of target shareholder capital gains tax liabilities affecting acquisition features is driven by the tax liabilities of the target firm CEO. To test this, we estimate CEOs' capital gains tax liabilities for a large sample of acquisitions and examine the effects of such liabilities on acquisition outcomes. Results indicate that the previously documented positive relations between shareholder-level capital gains tax rates and (1) the likelihood of a nontaxable acquisition (Ayers, Lefanowicz, and Robinson 2004), and (2) acquisition premiums (Ayers, Lefanowicz, and Robinson 2003) are largely driven by CEO tax effects. We also find evidence consistent with (1) CEOs' tax incentives leading to potential agency conflicts under certain conditions, and (2) acquisition structure or premium being adjusted in response to CEOs' taxes depending on the alternatives available to the acquirer. Our study contributes to our understanding of what and whose taxes affect acquisition structure and value.

Informed by Perceptual Deterrence Theory, we conduct multiple experiments to investigate when and how auditor actions can help deter manager opportunism. In Study 1A, we find that managers are less likely to use real earnings management (REM) when they expect auditors to both increase scrutiny and communicate their observations to the board. However, this effect occurs only when managers' operational decisions are inconsistent (versus consistent) with peer behavior. Study 1B findings suggest that increased auditor scrutiny alone (without auditor-board communication) is not likely to deter REM. In Study 2, we find that increased auditor scrutiny with communication to the board effectively deters both accruals-based earnings management (AEM) and REM, reducing the total level of manager opportunism. However, without communication, increased auditor scrutiny deters AEM, but also induces more REM. Our findings highlight the importance of auditor-board communication and demonstrate how auditor actions can contribute to the deterrence of manager opportunism. Data Availability: Contact the authors.

Using a global sample of multinational corporations (MNCs) and their foreign subsidiaries, we find that repatriation taxes impair subsidiary-level investment efficiency. Consistent with internal agency conflicts between the central management of the MNC and the manager of the foreign subsidiary being the driver, we show that this effect is concentrated in subsidiaries with high information asymmetry and in subsidiaries that are weakly monitored. Quasi-natural experiments in the U.K. and Japan establish a causal relationship for our findings and suggest that a repeal of repatriation taxes increases subsidiary-level investment efficiency while reducing the level of investment. Our paper provides timely empirical evidence to inform expectations for the effects of a recent change to the U.S. international tax law that eliminated repatriation taxes from most of the future foreign earnings of U.S. MNCs. JEL Classifications: H21; H25; F23; G31. Data Availability: Data are available from the public sources cited in the text.

We evaluate whether reported accounting numbers are informative about earnings uncertainty and whether earnings uncertainty is priced. We use quantile regressions to forecast the standard deviation, skewness, and kurtosis of future earnings. These three moments are important measures of earnings uncertainty because they reflect the size of the average deviation from expected earnings and the amount of extreme upside potential, extreme downside risk, or both. We develop a novel approach for evaluating the reliability of our forecasts and we show that they are reliable. We also document that: (1) equity prices are increasing (decreasing) in the standard deviation and skewness (kurtosis) of lead return on equity and (2) credit spreads are increasing (decreasing) in the standard deviation and kurtosis (skewness) of lead return on assets. Our results indicate that historical financial statements are informative about earnings uncertainty and that earnings uncertainty is priced. Data Availability: Data are available from the public sources cited in the text.