Research
Investor Perceptions of the Book Minimum Tax
The Inflation Reduction Act establishes a new 15 percent corporate minimum tax on large U.S. corporations’ adjusted financial accounting income. While the minimum tax is estimated to raise $222 billion over 10 years, critics fear firms will manipulate their accounting earnings to reduce their tax liabilities, resulting in less revenue raised. Further, given the current political environment future legislatures could gut the tax, further eroding estimated tax revenues. Using an event study, we examine the extent to which investors believe this tax will reduce firm value. We examine stock market reactions around key legislative developments leading to the enactment of the book minimum tax. Our findings show targeted firms experience significantly lower stock returns than non-targeted firms during the enactment process (about 1.4 to 1.8 percent). In aggregate, our findings are consistent with the Joint Committee on Taxation’s revenue estimates. In cross-sectional tests, we do not observe that the firms most likely to avoid the tax via earnings management experience more positive returns, suggesting the market does not anticipate firms avoiding the tax via earnings management. Overall, our results suggest investors do not expect firms to largely avoid this tax. Instead, they expect a significant portion of the corporate minimum tax will be remitted by firms and borne by shareholders. More
Proximity and the Management of Innovation
UNC Tax Center Research Scholars Stephen Glaeser and Eva Labro in addition to Chloe Glaeser, UNC Assistant Professor of Operations, will have their research published in Management Science. Their research examines the tax incentives that encourage firms to locate R&D facilities away from corporate headquarters and the consequences this has on productivity. More
Tax Planning Knowledge Diffusion via the Labor Market
This paper examines the extent to which the labor market facilitates the diffusion of tax planning knowledge across firms. Using a novel dataset of tax department employee movements between S&P 1500 firms, the researchers find that firms experience an increase in their tax planning after hiring a tax employee from a tax aggressive firm. This finding is robust to various research designs and specifications. More
Tax Reform Made Me Do It!
This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes — bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. More
Strategic Subsidiary Disclosure
We use data multinational firms provide to the Internal Revenue Service regarding their foreign subsidiary locations to explore whether some firms fail to publicly disclose subsidiaries in some countries, even when the subsidiaries are significant and should be disclosed per Security and Exchange Commission rules. More
U.S. Firms on Foreign (Tax) Holidays
We undertake the first large-sample examination of foreign tax holiday participation among U.S. corporations. Tax holidays are temporary reductions of tax granted by governments, usually in conjunction with new business investment. More
Shareholder Wealth Effects of Border Adjustment Taxation
We examine the effects of a proposed border adjustment tax on the share prices of publicly traded firms. Border adjustment refers to exempting export revenue from taxation while also disallowing deductions for the cost of imports, and has been proposed as a potential U.S. corporate tax reform. More
The Taxman Cometh: Does Tax Uncertainty Affect Corporate Cash Holdings?
We examine whether firms hold more cash in the face of tax uncertainty. More
Is the Market Grossed out by Gross-Ups? An Investigation of Firms that Pay Their CEOs’ Taxes
This study provides evidence on whether investors value tax gross-up provisions for executives, and how the elimination of these provisions changes executive compensation. More
Public Tax-Return Disclosure
We investigate the effect of public disclosure of information from corporate tax returns filed in Australia on consumers, investors, and the corporations themselves that were subject to disclosure. More
