Working Papers
Does Anti-Tax Avoidance Regulation Curb Industry Concentration?​​
with Jesse van der Geest, Martin Jacob, and Christian Peters | February 2025
Policymakers claim that combating tax avoidance can level the playing field between larger and smaller firms and therefore reduce industry concentration. We test the validity of this claim by employing administrative data on industry concentration and exploiting the introduction of anti-tax avoidance regulations across 17 European countries. While we find that these regulations significantly reduce tax avoidance, we do not find any evidence that they have an impact—statistically or economically—on industry concentration. Our inferences are robust to different research designs and settings. Additional tests reveal that our non-results stem from a genuine lack of effect rather than a lack of statistical power. Finally, we show that the lack of effect on concentration can be explained by anti-tax avoidance rules equally reducing tax avoidance by industry leaders and their competitors. Our findings cast doubt on the idea that broad-based attempts at combating tax avoidance can materially influence industry concentration.
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with Vincent Giese | January 2025
We explore whether bank regulatory oversight affects the ability of environmental enforcement to reduce industrial emissions. A major objective of environmental enforcement is to reduce industrial emissions by encouraging firms to employ greener production processes and technologies. However, such changes often require external financing obtained from banks, and bank regulatory oversight can constrain the availability of bank lending. Consistent with this idea, we find that the reduction in air pollution in response to county-level environmental enforcement is attenuated in counties exposed to increased bank regulatory oversight, as measured by severe enforcement actions. This effect is concentrated in counties with greater exposure to banks with lower capital and loan loss reserve adequacy and fewer alternative sources of bank loans. We also find that ex ante oversight tendencies play a role: environmental enforcement leads to less emission reduction in counties with greater exposure to stricter regulators. Finally, we show that the negative impact of bank regulatory oversight on small business lending is the likely mechanism behind our primary findings. Collectively, our findings are consistent with bank regulation affecting the extent to which environmental enforcement reduces emissions, suggesting that one regulator’s mission can impact the objectives of another.
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Artificial Intelligence and White-Collar Work: Evidence from the Accounting Profession
with Jens Böke, Daniela De la Parra, and Stephen Glaeser | November 2024
We examine how accounting-related investments in artificial intelligence (AI) relate to firm-level demand for accounting labor and accounting work outcomes. We identify accounting-related AI investments using public firms’ job market postings. We first document that accounting-related AI investments increased markedly in recent years. These investments span all accounting subfields (audit, financial, managerial, and tax) and concentrate in larger, growing, and more intangible intensive firms. Firms investing in accounting-related AI demand significantly fewer accounting skills in the labor market and hire marginally fewer accountants. Despite accounting-related AI investments negatively relating to accounting hiring, they positively relate to improvements in some accounting-role-specific outcomes, such as 10-K filing speeds, 10-K readability, audit fees, and tax forecast accuracy. However, accounting-related AI investments do not relate to more extreme and high-impact outcomes, such as restatements, effective tax rates, and return on assets. We conclude that accounting-related AI investment reduces demand for traditional accountants and accounting skills but does not lead to worse accounting work outcomes. Our study provides preliminary evidence of how AI relates to labor demand for white-collar workers, and their work product.​
Are Superstar Firms Tax Advantaged?
with Ed Maydew and Will Yoder | August 2024
Influential research finds that economic activity is increasingly concentrated in large, highly profitable “superstar firms”, potentially leading to adverse outcomes such as decreased competition and entrenchment. We examine whether superstar firms are tax advantaged compared to other firms, and if so, whether tax advantages contribute to the rise and persistence of superstar firms. While we find some evidence of a tax advantage in the form of lower tax burdens for superstar firms using traditional cash effective tax rates, this advantage disappears once we apply a correction to account for mismeasurement of intangible capital. Thus, superstar firms do not appear to have an advantage in terms of lower average tax burdens. However, we find that superstar firms have a tax advantage in that they allocate more tax-related cash savings to activities that are risky but likely have higher expected returns. Moreover, we find that the mapping of current tax burden into future superstar status is stronger for current superstar firms than other firms. That is, superstar firms appear to be better at deploying tax-related cash savings in ways that help to sustain their superstar status.
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Spillovers from Regulatory Fragmentation: Evidence from Corporate Tax Burdens
with John Barrios and Yongzhao Lin | August 2024
Increased corporation regulation in recent decades has raised the likelihood of regulatory oversight spillovers—the extent to which one agency’s interactions with a regulated firm affects firm behaviors under the purview of another agency. We study how such spillovers can affect the mission of a specific regulator—the tax authority—using a measure of firm-specific exposure to fragmented regulation. Using a sample of publicly-traded U.S. firms, we document that regulatory fragmentation is associated with higher effective tax rates, indicating that non-IRS oversight constrains tax planning, which is the purview of the tax authority. This relation is increasing in the overall amount of regulation the firm faces and in the relative absence of alternative (e.g., capital market) monitors. Additionally, we observe that regulatory fragmentation is associated with lower IRS scrutiny and less variation in tax burdens within industries, suggesting that fragmented oversight impacts IRS monitoring efforts as well as industry competitive dynamics.
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The Sound of Uncertainty: Examining Managerial Acoustic Uncertainty in Conference Calls
with Daniela de la Parra | July 2024
Building on the literature in linguistics showing that the manner in which individuals speak provides context incremental to the actual spoken words, we study whether uncertainty expressed via the acoustic features of managerial speech in conference calls impacts analyst behavior. Using a novel measure of managerial acoustic uncertainty, we find that when managers sound more uncertain in their responses to analyst questions, analyst forecast dispersion increases, even after accounting for characteristics of the actual language being used by managers and analysts. This finding is consistent with analysts relying less on information conveyed via acoustically uncertain responses, and thus more on information idiosyncratic to the analyst. Furthermore, we find that the association between acoustic uncertainty and analyst forecast dispersion varies predictably with the characteristics of these manager-analyst interactions, such as the specificity and forward-looking nature of the manager's response. Finally, we find that managerial acoustic uncertainty is positively associated with bid-ask spreads, and that this is concentrated within firms with greater increases in post-conference call forecast dispersion. Our findings suggest that uncertainty expressed in the acoustic features of managerial speech can affect market participants. Furthermore, our study creates and validates an approach to measuring managerial acoustic uncertainty.
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Tax-induced Organizational Complexity and Executive Performance Measurement
with Eva Labro and Ginger Scanlon | June 2024
We investigate the relationship between tax-induced organizational complexity (TIOC) and executive performance measurement. We define TIOC as organizational complexity that would not exist in a world without differing tax policies across jurisdictions. While these structures can reduce tax burdens, firms must design their performance measurement systems to ensure executives effectively manage this complexity. Measuring TIOC using firms’ subsidiaries in tax havens and other low-tax countries, and controlling for non-tax sources of organizational complexity, we find first that TIOC is associated with longer-term performance measurement, consistent with executives needing to manage both the often-immediate tax benefits and often-delayed costs associated with TIOC. Second, TIOC is associated with a higher use of adjusted performance metrics, suggesting firms correct standard metrics for TIOC-induced measurement error and bias. Finally, TIOC is associated with more unique metrics and lower similarity in metrics across the executive team, consistent with effective management of TIOC requiring diverse activities.
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Corporate Tax System Complexity and Investment
with Harald Amberger and Jaron Wilde | February 2024
Effective policymakers must balance the demands of formulating a corporate tax system that spurs economic activity (e.g., investment) while promoting a “level playing field” across firms. Balancing these tradeoffs has likely caused tax systems to become more complex over time, increasing firms’ difficulty in understanding and complying with tax regulations. We investigate the impact of tax system complexity on the responsiveness of firm-level investment to tax policy changes. Examining firm-level capital and labor investment and exploiting staggered tax rate changes across countries, we document two key findings. First, firm-level investment is less sensitive to changes in the corporate income tax rate when tax system complexity is higher, suggesting that such complexity can undermine the ability of tax policy to affect economic growth. Second, the impact of complexity on the sensitivity of investment to the tax rate varies significantly across firms, with domestic-owned, smaller, and private firms being more affected by tax system complexity. The cross-sectional disparity in the effect suggests such complexity could reduce tax system parity. Our findings collectively suggest that corporate tax system complexity can negatively impact the ability of fiscal policy to affect investment and leads to heterogeneous tax policy responses across firms.​
Featured in: Kenan Insights
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Other Papers
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with Stephan Hollander and Martin Jacob | June 2020
We use U.S. Securities and Exchange Commission (SEC) filings to provide initial large-sample evidence regarding utilization of corporate tax provisions by U.S. firms under the Coronavirus Aid, Relief, and Economic Security Act (CARES). These tax provisions were intended to provide firms immediate liquidity to prevent widespread bankruptcies and layoffs in response to the COVID-19 pandemic. However, critics have argued that the provisions were poorly targeted and amounted to “giveaways” for shareholders of large corporations. We find that 38 percent of firms discuss at least one of the CARES tax provisions in their SEC filings, a result primarily attributable to the net operating loss (NOL) carryback provision. Firms experiencing lower stock returns during the COVID-19 outbreak are more likely to discuss CARES tax provisions, but not firms in states or industry sectors exhibiting large increases in unemployment. Further, we find a higher likelihood of tax provision discussions for firms with pre-pandemic losses and higher financial leverage. Finally, we document some evidence that firms facing potential reputational or political costs from discussing these tax provisions may have avoided doing so. Our analyses suggest that tax provisions under CARES were not material for most publicly-traded U.S. firms, were not likelier to benefit firms in greater need of liquidity during the pandemic, and that some firms perceived that disclosing benefits would be costly. These findings are important for policymakers as they consider additional economic relief for U.S. corporations while the coronavirus pandemic lingers.
Featured in: Washington Post, Bloomberg Tax, Becker-Friedman Institute, BFI COVID Series