Browsing by Subject "tax avoidance"
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Item Citizen Watch in the Accounting Department? Tax and Financial Reporting Responses to Employee Whistleblowing Allegations(2013-07-01) Wilde, Jaron HThis study examines the relation between employee whistleblowing allegations and firms? subsequent tax and financial reporting behavior. I draw on economic theory to develop expectations for and test firms? tax and financial reporting responses to whistleblowing reports of corporate financial misconduct. I employ a difference-in-difference research design to test whether firm?s subject to employee whistleblowing allegations related to financial misconduct exhibit significantly less misreporting risk and tax avoidance in the period following the allegations relative to a control group of firms not subject to whistleblowing allegations. Using a unique sample of whistleblowing cases obtained from the U.S. government, I find that firms subsequently engage in significantly less aggressive financial reporting behavior and have significant increases in their effective tax rates following whistleblowing allegations. This study contributes to the literature by providing evidence on firms? tax and financial reporting responses to employee whistleblowing and by highlighting the role that employees play in both tax and financial reporting oversight. In light of regulators? recently heightened emphasis on whistleblower programs, the results of this study should be of interest to regulators, researchers, auditors, and investors.Item Tax Avoidance and Investment: Distinguishing the Effects of Capital Rationing and Overinvestment(2012-10-02) Mayberry, Michael 1985-I examine the relation between tax avoidance and firm investment by drawing on two capital market imperfections, adverse selection and moral hazard, to provide a link between tax avoidance and investment. Firms experiencing capital rationing because of adverse selection rely on internal resources to fund investment opportunities because of costly external financing. Tax avoidance can provide additional cash-flows that may alleviate capital rationing. Alternatively, tax avoidance can exacerbate problems of moral hazard by facilitating managerial rent extraction in the form of overinvestment. I find a positive relation between tax avoidance and investment suggesting effects of either capital rationing or overinvestment. To distinguish between these two effects, I examine how the relation between tax avoidance and investment varies in settings where capital rationing or overinvestment is more likely to occur. My findings suggest that firms rely on the cash savings from tax avoidance to alleviate capital rationing.