Work

Legal Enforcement and Corporate Behavior: An Analysis of Tax Aggressiveness after an Audit

Year: 2015

Type: article

Abstract: Contrary to common expectations, legal enforcement may increase subsequent corporate misbehavior. Using Internal Revenue Service and financial statement data, we find that corporations gradually increase their tax aggressiveness for a few years following an audit and then reduce it sharply. We show that this U-shaped impact is consistent with strategic responses on the part of firms and with Bayesian updating of audit risk. This adverse effect on corporate behavior calls for a reexamination of both the theory and policy of legal enforcement.

Source: The Journal of Law and Economics

DOI: 10.1086/684037

Authors: Jason DeBacker, Bradley T. Heim, Anh Tran, Alexander Yuskavage

Institutions: Middle Tennessee State University, Indiana University, United States Department of the Treasury

Language: English

Topic: Corporate Taxation and Avoidance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W3122552364

FWCI: 30.92

Cites: 42

Cited by: 107

Related to: 10