@article{goldman_2024, title={Did FASB Interpretation Number 48 (FIN 48) Affect Noninnovative Corporate Investment?}, volume={46}, ISSN={["1558-8017"]}, DOI={10.2308/JATA-2021-034}, abstractNote={ABSTRACT As firms lower innovative investment in response to FASB Interpretation Number 48 (FIN 48), they choose between reallocating those funds to noninnovative investment, not changing noninnovative investment, or lowering noninnovative investment. Using a difference-in-differences research design, I provide evidence of the latter outcome. I also show that the results persist each year following FIN 48, are consistent across both types of noninnovative investment, and are more prominent among firms with declining research and development (R&D) and among firms not previously under continuous audit. I also provide evidence that these effects are mitigated when managers have greater incentives to reallocate investment. My findings respond to Blouin and Robinson (2014) call to understand the real effects of FIN 48 by providing evidence that it lowers firms’ incentives for noninnovative investment.}, number={1}, journal={JOURNAL OF THE AMERICAN TAXATION ASSOCIATION}, author={Goldman, Nathan C.}, year={2024}, pages={57–81} }
 @article{drake_goldman_lusch_schmidt_2024, title={Disclosure of tax-related critical audit matters and tax-related outcomes}, ISSN={["1911-3846"]}, DOI={10.1111/1911-3846.12920}, abstractNote={AbstractGiven that tax‐related critical audit matters (tax CAMs) were prevalent among accelerated filers (18.5% of observations) during the initial year of CAM disclosures, we examine whether an auditor's disclosure of tax CAMs is associated with variation in tax‐related financial reporting quality, tax avoidance, and tax‐related earnings management. Finding an association between tax CAMs and one of these tax outcomes would indicate that the new auditor reporting standard has indirectly affected investors. Examining the first year of CAM disclosures, we do not find that tax CAMs are associated with broad proxies of tax‐related audit or financial reporting quality (e.g., restatements, internal control weaknesses, comment letters) or tax avoidance (e.g., effective tax rates or book‐to‐tax differences). We do find that tax CAMs are associated with a modest increase in tax accrual quality, an increase in the reserve for unrecognized tax benefits, and a reduction in the likelihood of tax‐related earnings management. However, we do not find these tax CAM effects persist into the second year of CAM reporting. Our evidence is consistent with tax CAM disclosures having a modest but short‐lived effect on companies' reporting of tax accounts. Our findings should inform the PCAOB as they conduct their post‐implementation review of the new audit reporting standard.}, journal={CONTEMPORARY ACCOUNTING RESEARCH}, author={Drake, Katharine D. and Goldman, Nathan C. and Lusch, Stephen J. and Schmidt, Jaime J.}, year={2024}, month={Jan} }
 @article{goldman_lampenius_radhakrishnan_stenzel_almeida_2023, title={IRS scrutiny and corporate innovation}, ISSN={["1911-3846"]}, DOI={10.1111/1911-3846.12905}, abstractNote={AbstractThe IRS administers tax laws enacted by Congress. As part of the IRS's duties, they often consider taxpayers' financial statements to help ensure accurate tax reporting and payments. We posit that enhanced financial statement disclosures of tax information under FASB Interpretation Number 48 (FIN 48) lead to more IRS scrutiny and alter the incentives for corporate innovation. Using patent applications as a measure of corporate innovation, we employ a difference‐in‐differences research design with publicly listed US firms as the treatment group and privately held US firms not subject to the disclosure requirements as the control group. We find robust evidence that, following the onset of FIN 48, the number of patent applications by publicly listed firms decreased between 15.4% and 24.3% relative to private firms. This decline in patent applications is attributable to incremental innovation, suggesting that firms lower innovation related to projects with tax benefits that are more likely to be scrutinized by the taxing authorities. These findings suggest that there are real effects of IRS scrutiny and, in particular, real effects of tax disclosures under FIN 48 on corporate innovation.}, journal={CONTEMPORARY ACCOUNTING RESEARCH}, author={Goldman, Nathan and Lampenius, Niklas and Radhakrishnan, Suresh and Stenzel, Arthur and Almeida, Jose Elias}, year={2023}, month={Nov} }
 @article{traini_goldman_lewellen_2022, title={Aggressive Tax Planning and Labor Investments}, ISSN={["2160-4061"]}, DOI={10.1177/0148558X221089638}, abstractNote={ We examine the association between aggressive tax planning and labor investment efficiency among U.S. firms. Labor is an important input to production that is material to many firms, and prior research suggests that inefficient labor investments can negatively affect future profitability and growth. We provide evidence that firms engaging in aggressive tax planning are associated with deviations from expected labor investments, which is indicative of labor investment inefficiency. We find that our results are concentrated in labor underinvestment, consistent with risks and uncertainties from aggressive tax planning making firms more cautious when investing. Our findings are strongest among firms with greater tax risk, higher labor costs, and weaker corporate governance. Our study contributes to the literature examining tax planning consequences by providing evidence that a tradeoff exists between aggressive tax planning and investments in labor. Therefore, our results suggest that managers should carefully consider the cash flow benefits of tax planning in conjunction with the potential effects of lower labor investments to ensure that the overall long-term effect of the tax strategy is value-increasing. }, journal={JOURNAL OF ACCOUNTING AUDITING AND FINANCE}, author={Traini, Simone and Goldman, Nathan C. and Lewellen, Christina M.}, year={2022}, month={Apr} }
 @article{goldman_ozel_2023, title={Executive compensation, individual-level tax rates, and insider trading profits}, volume={76}, ISSN={["1879-1980"]}, DOI={10.1016/j.jacceco.2022.101574}, abstractNote={We examine whether individual-level taxes affect executives' propensity to use nonpublic information in insider trades. We predict and find a positive relation between abnormal insider trading profitability and income tax rates. Using plausibly exogenous variation in state income tax rates, we estimate that the average executive uses insider trading profits to offset between 12.2% and 19.6% of the effect that income taxes have on their net compensation. We show that the sensitivity of these profits to tax rates varies predictably with the executives' compensation and shareholdings, firm monitoring effectiveness, and information asymmetry between insiders and outside investors. We also demonstrate a positive association between SEC enforcement actions and tax rates, suggesting that tax-rate-driven changes in abnormal trading profits expose insiders to legal risk. We find that insider trading volume exhibits little sensitivity to tax rates. Our findings show that income taxes affect executives' tendency to use private information in their trades.}, number={1}, journal={JOURNAL OF ACCOUNTING & ECONOMICS}, author={Goldman, Nathan C. and Ozel, Naim Bugra}, year={2023}, month={Aug} }
 @article{campbell_goldman_li_2021, title={Do Financing Constraints Lead to Incremental Tax Planning? Evidence from the Pension Protection Act of 2006*}, ISSN={["1911-3846"]}, DOI={10.1111/1911-3846.12679}, abstractNote={ABSTRACTOver the past three decades, academic research has sought to understand how cash shortfalls impact a firm's ability to take all available value‐increasing investment projects. We investigate whether firms facing greater financing constraints turn to tax strategies that generate lower cash effective tax rates (ETRs) to mitigate the adverse effect of these financing constraints. We use the Pension Protection Act of 2006 (PPA 2006) as an exogenous shock to financing constraints for pension firms, but not for other firms. Using a difference‐in‐differences research design, we predict and find that pension firms experience a decrease in their cash ETRs by 1.8%–2.4% after the PPA 2006, relative to other firms. These cash tax savings mitigate the investment shortfall brought about by financing constraints by 19%. We also predict and find that the decline in cash ETRs is greater among firms more adversely affected by the PPA 2006. Our paper sheds light on the direction, causality, and economic magnitude of the association between financing constraints and tax planning activities. We also provide insight into the role of tax planning activities within firms' broader corporate business strategies in responding to financing constraints.}, journal={CONTEMPORARY ACCOUNTING RESEARCH}, author={Campbell, John L. and Goldman, Nathan C. and Li, Bin}, year={2021}, month={Jun} }
 @article{goldman_harris_omer_2022, title={Does task-specific knowledge improve audit quality: Evidence from audits of income tax accounts*}, volume={99}, ISSN={["1873-6289"]}, DOI={10.1016/j.aos.2021.101320}, abstractNote={Two forms of expertise can influence audit quality: industry and task-specific expertise. If tax knowledge is predominately task-specific, audit offices with increased exposure to complex tax issues will develop tax task-specific expertise. Using outcomes related to income tax account audits, we examine whether tax task-specific knowledge (TSK) accumulates at the audit office level and affects the income tax accounts’ audit quality. We find that tax TSK increases the income tax accounts' audit quality, suggesting individual tax TSK accumulates at the office level. Additionally, semi-structured interviews of partners/senior managers at Big 4 audit firms validate group information processing as a theory that explains TSK developing at the office level and confirms that tax knowledge is predominately task-specific with some industry-specific knowledge. We contribute to and extend the literature examining audit office expertise by providing evidence that exposure to complex tax issues develops TSK at the office level and enhances audit quality. These findings provide archival and qualitative evidence of how TSK develops at the office level. • Provide evidence that exposure to complex issues develops task-specific knowledge. • Show task-specific knowledge aggregates at the audit office level. • Conduct semi-structured interviews to support archival findings. • Contribute to the literature examining auditor competency and audit quality. • Extend the literature examining the auditing of income taxes.}, journal={ACCOUNTING ORGANIZATIONS AND SOCIETY}, author={Goldman, Nathan C. and Harris, M. Kathleen and Omer, Thomas C.}, year={2022}, month={May} }
 @article{drake_goldman_murphy_2022, title={Foreign Employment, Income Shifting, and Tax Uncertainty}, volume={97}, ISSN={["1558-7967"]}, DOI={10.2308/TAR-2019-0047}, abstractNote={ABSTRACTWe examine the effect of foreign employment on two outcomes—income shifting and the tax uncertainty of foreign transactions. Using a hand-collected sample of employment disclosures, we partition our sample into firm-years with a higher or lower degree of foreign employment. Using two distinct income shifting models, we document that, on average, a high degree of foreign employment is associated with greater tax-motivated income shifting out of the U.S. We also posit and find that a high degree of foreign employment enhances the economic substance of foreign transactions, reducing the tax uncertainty associated with foreign income. We conduct additional analyses to mitigate selection bias concerns, and we use exogenous changes to the costs and benefits of income shifting using foreign employment to strengthen identification. Our results highlight firms' use of employees as part of a tax-efficient supply chain and how foreign employment enhances income shifting opportunities between jurisdictions.}, number={2}, journal={ACCOUNTING REVIEW}, author={Drake, Katharine D. and Goldman, Nathan C. and Murphy, Francis}, year={2022}, month={Mar}, pages={183–212} }
 @article{beardsley_goldman_omer_2022, title={Audit Office Industry Diversity and Audit Quality}, volume={37}, ISSN={["2160-4061"]}, DOI={10.1177/0148558X20942618}, abstractNote={ This study examines the association between the industry diversity of an audit office and audit quality, where industry diversity is the extent to which clients differ by industry classification. We find a negative association between industry diversity and audit quality that is robust to controlling for other audit office and client characteristics. We observe this association while holding the level of audit office specialization or expertise in a particular industry constant. The association is most apparent at the low end of the distribution of industry diversity, where audit offices with the least diverse client portfolios have the highest audit quality. We also find that the association exists for both small and large audit offices as well as both industry specialists and non-industry specialists. However, we do not observe the association when the office audits clusters of clients, where clusters are three or more clients in the same industry. }, number={4}, journal={JOURNAL OF ACCOUNTING AUDITING AND FINANCE}, author={Beardsley, Erik L. and Goldman, Nathan C. and Omer, Thomas C.}, year={2022}, month={Oct}, pages={777–805} }
 @article{beasley_goldman_lewellen_mcallister_2021, title={Board Risk Oversight and Corporate Tax-Planning Practices}, volume={33}, ISSN={["1558-8033"]}, DOI={10.2308/JMAR-19-056}, abstractNote={ABSTRACTRisk oversight by the board of directors is a key component of a firm's enterprise risk management framework, and recently, boards have paid more attention to their firm's tax-planning activities. In this study, we use a hand-collected sample of proxy statement disclosures about the board's role in risk oversight and provide evidence that risk oversight is negatively associated with both tax uncertainty and overall tax burdens. We find that risk oversight is most strongly associated with positions that yield permanent tax benefits and also with less risky tax-planning activities. Overall, the evidence suggests that board risk oversight is associated with more effective tax-planning practices.}, number={1}, journal={JOURNAL OF MANAGEMENT ACCOUNTING RESEARCH}, author={Beasley, Mark S. and Goldman, Nathan C. and Lewellen, Christina M. and McAllister, Michelle}, year={2021}, pages={7–32} }