Real Effects of Accounting Rules: Evidence from Multinational Firms’ Investment Location and Profit Repatriation Decisions

By John R. Graham, Michelle Hanlon, Terry Shevlin. 2010

159 citations recorded by the source corpus.

We analyze survey responses from nearly 600 tax executives to better understand corporate decisions about real investment location and profit repatriation. Our evidence indicates that avoiding financial accounting income tax expense is as important as avoiding cash income taxes when corporations decide where to locate operations and whether to repatriate foreign earnings. This result is important in light of the recent research about whether financial accounting affects investment and in light of the decades of research on foreign investment that examines the role of cash income taxes but heretofore has not investigated the importance of financial reporting effects. Our analysis suggests that financial reporting is an important factor to be considered in the policy debates focused on bringing investment to the United States.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/da3d99094f4a1a74f85f3f86f340e3cfac12a1ab

How researchers see this paper

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In Accounting

1. Michelle Hanlon
2. Terry Shevlin
3. Nemit Shroff
4. John R. Graham
5. Edward L. Maydew
6. Ryan J. Wilson
7. Chen Lin
8. Tao Chen

In Economics and Econometrics

1. Michelle Hanlon
2. Terry Shevlin
3. Nemit Shroff
4. John R. Graham
5. Edward L. Maydew
6. Gordon Richardson
7. Roman Lanis
8. Scott D. Dyreng

Citations in the corpus

• A review of tax research (2010, unknown): “In their survey of tax executives, Graham et al. (2010a) report that 55 percent of the respondents state that the income tax expense effect on the accounting income statement is an important factor in their decision to repatriate or reinvest earnings.87”
• Tax Rates and Corporate Decision Making (2017, unknown): “Graham et al. (2011) explore questions concerning the location, reinvestment, and repatriation of foreign earnings.”
• Corporate investment and changes in GAAP (2016, unknown): “One line of inquiry shows that financial reporting considerations and earnings management incentives affect investment decisions—i.e., firms’ investment decisions are affected by their incentives to report higher earnings (e.g., Bushee 1998; Bens et al. 2002; Graham et al. 2005; Graham et al. 2011).”
• Incentives for Tax Planning and Avoidance: Evidence from the Field (2014, background): “Finally, Graham et al. (2011) highlight that the GAAP ETR is an important benchmark that is compared across firms.”