The municipal bond market has long been criticized for its lack of disclosure, which prior research often attributes to weak regulatory oversight. We offer another explanation: tax clienteles. Most municipal bonds are tax-exempt, and thus primarily attract high-tax retail investors, who may lack the incentive or ability to demand or monitor disclosures. In contrast, taxable bonds attract a broader investor base, including institutional investors who can demand disclosure. We find that issuers provide more continuing disclosures in years with taxable bonds outstanding relative to years without. Issuers also increase disclosures after issuing their first taxable bond and decrease disclosures after calling their last taxable bond. Exploiting a tax law change, we find that disclosures increase following plausibly exogenous increases in taxable bond issuances. Our results suggest that the tax clienteles for municipal bonds affect issuers’ disclosure practices and can inform those concerned with disclosure noncompliance in the municipal bond market.

In 2018, the European Union (EU) introduced a new mandatory reporting requirement for a wide range of cross‐border tax arrangements (EU Directive 2018/822, also known as DAC6). Unlike prior corporate transparency initiatives, which put the reporting responsibility primarily on the taxpayers, this directive puts the initial reporting responsibility on the third‐party intermediaries who are involved in the reportable arrangement at any stage during the planning and execution process. We exploit the adoption of DAC6 in the EU to examine the effectiveness of third‐party reporting in curbing cross‐border tax planning by multinationals. Using a difference‐in‐differences research design, we find that affected firms reduce income shifting and report higher effective tax rates in the post‐adoption period. The reduction in income shifting is stronger for affiliates operating in countries without legal professional privilege extensions and in countries where noncompliance penalties are higher. Our results highlight the importance of strong third‐party reporting requirements in constraining cross‐border tax planning.

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.

This study examines a new form of initial public offerings, “supercharged” IPOs, where a firm-organized pre-IPO as a pass-through entity undergoes a series of transactions that steps-up the adjusted tax basis of the IPO firm's assets. This step-up imposes tax liabilities on pre-IPO owners, but also creates significant future tax benefits for the firm; the average anticipated deferred tax asset is $486 million ($13 per share) for our sample of supercharged IPO firms. Pursuant to tax receivable agreements, supercharged IPO firms pay a large portion of these tax benefits to pre-IPO owners as they are realized in the future. Future firm performance must be sufficiently strong for the IPO firm and the pre-IPO owners to realize the future tax benefits created by the supercharged transaction structure. We hypothesize and provide evidence of higher IPO offer prices and stronger future performance for supercharged IPO firms relative to traditional IPO firms.