Offshore Activities and Corporate Tax Avoidance

Taxation of multinational companies (MNCs) has received increasing attention from politicians, the media, regulators, and academics. While the popular press provides considerable anecdotal evidence that large MNCs pay lower taxes than their domestic counterparts, academic research provides mixed evidence on how multinationality affects taxation. Although foreign operations provide additional cross-border tax avoidance opportunities such as income shifting to low-tax rate jurisdictions, the existing empirical studies find that MNCs do not have significantly lower effective tax rates than purely domestic firms have. As more U.S. firms become multinational and engage in offshore activities of serving foreign markets and moving production overseas, … Read more

Management Guidance Withdrawals During the Pandemic

The novel coronavirus (COVID-19) pandemic has drastically affected the global economy and offers a unique setting to investigate firm and market behavior through periods of heightened economic uncertainty. During the pandemic, many U.S. public firms withdrew their quarterly and annual guidance on their firms’ financial outlook. According to Intelligize, 851 companies announced the withdrawals of their management guidance between March 16 and May 31, 2020.[1] In contrast, guidance withdrawals were rare prior to the pandemic. The large increase in the number of withdrawals has attracted wide attention from investors, regulators, and the media (CNBC 2020; Wall Street Journal 2020). … Read more

Private Communication Between Managers and Financial Analysts: Evidence from Taxi Ride Patterns in New York City

Firm managers spend substantial time meeting privately with analysts and investors (e.g., Thomson Reuters 2009; Soltes 2014; Brown, Call, Clement, and Sharp 2015; Bushee, Gerakos, and Lee 2018). As evidenced by a wealth of anecdotes and surveys, such private communications are now found everywhere, becoming an important source of information to sell-side analysts (Brown et al. 2015). Despite the importance of these off-line, non-public interactions, however, little is known about the timing, nature, and value of private communications, primarily due to the data limitations inherent in their private nature. This study seeks to fill this gap by constructing a unique … Read more

Economic Consequences of Corporate Governance Disclosure

Related party transactions (RPTs) refer to a transfer of resources, services, or obligations between a reporting entity and a related party and usually offer insiders a way to expropriate wealth from other investors via self-dealing. Both the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) require detailed disclosure of material RPTs in annual reports and proxy statements. However, none of these regulators provided specific guidance on firms’ corporate governance related to ensuring that RPTs work in the best interest of the firm and its stakeholders. Investors were often kept in the dark on whether the firm … Read more

Economic Consequences of Hiring Wall Street Analysts as Investor Relations Officers

Investor relations (IR) connects the preparers of financial information with its users, aiming to facilitate efficient and effective interaction between the firm and the investment community. Historically, the IR function has been viewed as a communications role, and the investor relations officer (IRO) has had a background or training in communications and public relations. Recently, however, more companies turn to Wall Street to fill IR positions. For example, in a recent step toward a much-anticipated IPO, Spotify hired a former Wall Street veteran who had run the internet and media research groups at Barclays as head of IR.[1] A … Read more