We examine the relationship between analyst research and corporate earnings announcements to explore the relative importance of information discovery versus interpretation of previously released information. Using equity market reaction to capture information content, we find that information discovery (interpretation) dominates in the week before (after) firms announce their earnings. In addition, we find that the interpretation role increases in importance with the difficulty of financial accounting information. Analysis of all weeks surrounding earnings announcements shows that the information discovery role is overall more important. We are able to reconcile this result with the opposite finding in Francis et al. (2002).

Taxes represent a significant cost to the firm and shareholders, and it is generally expected that shareholders prefer tax aggressiveness. However, this argument ignores potential non-tax costs that can accompany tax aggressiveness, especially those arising from agency problems. Firms owned/run by founding family members are characterized by a unique agency conflict between dominant and small shareholders. Using multiple measures to capture tax aggressiveness and founding family presence, we find that family firms are less tax aggressive than their non-family counterparts, ceteris paribus. This result suggests that family owners are willing to forgo tax benefits to avoid the non-tax cost of a potential price discount, which can arise from minority shareholders’ concern with family rent-seeking masked by tax avoidance activities [Desai and Dharmapala, 2006. Corporate tax avoidance and high-powered incentives. Journal of Financial Economics 79, 145–179]. Our result is also consistent with family owners being more concerned with the potential penalty and reputation damage from an IRS audit than non-family firms. We obtain similar inferences when using a small sample of tax shelter cases.