Research

Abstract: This study examines how tariff-related uncertainty affects firms' information environments during the volatile 2025 U.S. tariff regime. Using firm-quarter earnings calls, I construct a firm-level measure of tariff discussion and examine its association with bid-ask spreads, earnings responses, and analyst outcomes. I also use a large language model to classify the uncertainty, exposure, and quality of firms' tariff-related disclosures. Greater tariff discussion is associated with wider bid-ask spreads, higher analyst forecast dispersion, and lower analyst coverage, but not with less accurate consensus forecasts. Tariff discussion also strengthens investors' responses to favorable earnings surprises, suggesting that investors place greater weight on realized earnings when tariff exposure is difficult to assess. The LLM-based analyses further show that tariff uncertainty and exposure are associated with negative announcement returns, whereas management preparedness and action plans are associated with positive returns. Together, the findings show that tariffs affect capital markets not only through their incidence as taxes, but also by increasing information asymmetry, altering the pricing of earnings news, and changing analysts' information-production decisions.

Abstract: Recent global audit failures and audit firms’ renewed emphasis on expanding their consulting practices have drawn increased attention to the effects of non-audit services on audit quality. We examine how firms’ tax reporting changes around the first-time purchase of auditor-provided tax services (APTS). Using detailed data on uncertain tax position (UTB) reserves, we find that companies report higher reserves in the year before they begin purchasing APTS, followed by a reversal after the purchase. These shifts are concentrated in the discretionary component of reserves, suggesting temporary changes in auditor scrutiny and client reporting behavior during the transition period. We also find that tax reserves are less accurate around these initial purchases, indicating short-term disruptions in reporting precision as audit firms and clients adjust to the new service relationship. Overall, the results highlight how the introduction of APTS can influence firms’ tax reporting dynamics in the near term and contribute to broader discussions about the role of non-audit services in practice.

Abstract: We use states’ staggered adoption of deferred tax relief deductions (DTRDs) to examine the effects of these laws on companies’ location decisions. DTRDs provide public companies with tax relief structured to provide an immediate financial reporting benefit while delaying cash tax savings. We find that the market reacts positively to the passage of DTRDs, which offsets the negative market response to the adoption of combined reporting. We also find that companies are less likely to relocate their subsidiaries and headquarters out of states that adopt a DTRD law, consistent with DTRDs encouraging companies to maintain their presence in a state. Our study contributes to ongoing discussions regarding the interplay between financial reporting and tax reporting, highlighting that financial reporting-influenced tax laws have valuation implications and can impact companies’ location decisions.

Abstract: This paper examines how corporate tax avoidance and tax risk changed following the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA lowered the corporate statutory tax rate from 35 to 21 percent and restructured international taxation, fundamentally altering firms’ cost-benefit calculus for tax planning. Using multiple measures of tax avoidance and tax risk, we compare firms with historically high and low tax avoidance before and after the reform. We find that non-avoiders’ effective tax rates declined consistent with the rate cut, while avoiders’ rates remained stable, indicating a reduction in aggressive tax strategies that became less rewarding under the new regime. Measures of tax risk, including uncertain tax benefits, disclosure-based proxies, analyst dispersion, and tax restatements also fell sharply for avoiders, narrowing the gap between avoiders and non-avoiders. Overall, our results suggest that the TCJA reduced the intensity and uncertainty of corporate tax avoidance, particularly among firms that had previously engaged in the most aggressive strategies.

Abstract: This proposed study investigates the impact of corporate tax avoidance on consumer behavior. We overcome challenges in previous studies by conducting a field experiment involving real-life tax protests at retail stores. These protests are designed to inform consumers about corporate tax practices, increasing awareness and salience of corporate tax avoidance to potential consumers. Our findings will provide valuable insights into the reputational costs of tax avoidance, informing both corporate strategies and regulatory policies aimed at enhancing tax transparency.