Do Superstar Firms Face Lower Tax Burdens?

with Ed Maydew and Will Yoder | June 2025

Influential research finds that economic activity is increasingly concentrated in large, highly profitable "superstar firms." An important yet unresolved policy question is whether superstar firms face tax burdens—taxes paid relative to pre-tax economic income—that are lower than that of other firms, which could contribute to their entrenchment. Acting on such concerns, policymakers are increasingly enacting tax increases that apply only to the largest, most profitable firms. We investigate whether superstar firms do indeed face lower tax burdens. Examining traditional cash effective tax rates (ETRs), we find some evidence that superstar firms face lower tax burdens. However, as measures of tax burdens, traditional ETRs are distorted by the financial accounting treatment of internally generated intangible assets. When employing an intangible-adjusted effective tax rate (IETR) measure that better accounts for internally generated intangibles, we find that the gap between superstar firms’ tax burdens and those faced by other firms narrows considerably, becoming statistically indistinguishable from zero in many specifications.

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Does Anti-Tax Avoidance Regulation Curb Industry Concentration?​​

with Jesse van der Geest, Martin Jacob, and Christian Peters | June 2025

Policymakers claim that combating tax avoidance can help reduce industry concentration by levelling the playing field between industry leaders, which are typically better equipped to shift profits across jurisdictions, and their competitors. We test the validity of this claim by employing administrative data on industry concentration and exploiting the staggered introduction of anti-tax avoidance regulations across 17 European countries. While we do find that these regulations are effective in significantly reducing tax avoidance, we do not find any evidence that they have an impact—statistically or economically—on industry concentration. Our inferences are robust to multiple research designs and settings. Additional tests give us confidence that our non-results stem from a genuine lack of effect rather than a lack of statistical power. Overall, our findings cast doubt on the idea that broad-based anti-tax avoidance regulations can materially influence industry concentration.

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The Sound of Uncertainty: Examining Managerial Acoustic Uncertainty in Conference Calls

with Daniela de la Parra | May 2025

Building on prior literature examining non-verbal aspects of managerial communication, we create a measure of firm uncertainty based on the acoustic features of managerial speech in earnings conference calls and examine its impact on analysts. We show 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 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, and with certain firm characteristics, such as the quality of its information environment. We also find that acoustic uncertainty is positively associated with the average forecast revision time and the likelihood of multiple forecast revisions post-conference call. Our findings are consistent with uncertainty expressed in the acoustic features of managerial speech affecting market participants, and suggest that our acoustic-based measure captures a unique aspect of firm uncertainty.

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Corporate Tax System Complexity and Investment Sensitivity to Tax Policy Changes

with Harald Amberger and Jaron Wilde | April 2025

Effective policymakers must balance the demands of formulating a corporate tax system that raises revenue and 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. Exploiting staggered tax rate changes and variation in tax system complexity across countries, we document two key findings. First, firm-level investment is less sensitive to changes in the corporate 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 tax complexity on the sensitivity of investment to tax rate changes varies significantly across firms, with domestic-owned, smaller, and private firms being more affected. These cross-sectional disparities are consistent with tax system complexity potentially reducing tax system parity. Collectively, our findings suggest that corporate tax system complexity can negatively impact the ability of fiscal policy to affect investment and lead to heterogeneous tax policy responses across firms.​

Featured in: Kenan Insights

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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 | March 2025

We examine how accounting-related investments in artificial intelligence (AI) relate to firm-level demand for accounting labor and to 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 faster 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 traditional 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. However, accounting-related AI investments do not relate to more extreme and high-impact outcomes, such as restatements. We conclude that accounting-related AI investment reduces demand for traditional accountants and accounting skills but does not lead to worse accounting work outcomes. Examining a source of plausibly exogenous variation based on university AI graduates supports this conclusion.​​​

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Unintended Regulatory Spillovers: The Impact of Bank Regulatory Oversight on Environmental Enforcement

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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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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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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Other Papers

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Who CARES? Evidence on the Corporate Tax Provisions of the Coronavirus Aid, Relief, and Economic Security Act from SEC Filings

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