Research

Research Interests

Publications

Dividend Taxation and the Ownership Structure of Private Firms

Solo-authored in  Journal of Corporate Finance, 2023, 79, 102380

Working Papers


This paper examines the corporate investment effect of a time limit on the use of net operating losses (NOLs). We predict that, when countries limit the use of NOLs to a few years instead of allowing indefinite use, managers of loss-making firms have an incentive to increase investments to recover these losses quickly. Using exogenous shocks to profitability from two earthquakes in Italy and variation in the tax treatment of NOLs over time, we find support for this prediction: When the use of NOLs is restricted in time (unrestricted), firms facing losses (do not) increase investment. This effect can be explained by timerestricted NOLs incentivizing firms to increase investments now to utilize NOLs before they expire. Moreover, this effect is more significant for firms with shorter investment horizons and in more profitable industries. We provide external validity for this finding using a large panel of firms from European Union countries exploiting variation in tax regimes. These results indicate that restricting loss offsets can increase investments of loss-making firms.

This paper examines the role of personal income taxes in multinationals’ corporate tax–induced profit shifting. As required in most OECD countries, firms need economic substance in low corporate–tax countries to justify profit shifting to these countries. Because high personal income taxes increase the cost of labor and thus the cost of providing economic substance, we predict that personal income taxes can mute corporate tax–induced profit shifting. Using data on personal and corporate income taxes from 26 European countries, we find that personal income taxes substantially reduce profit shifting to low corporate tax countries. This effect is stronger if the parent country imposes strict economic substance requirements. We also provide empirical support that firms use employees to justify economic substance in low corporate–tax countries and that the effect of personal income taxes is related to the tax incidence of employees’ personal income tax partly falling on firms. Our results show important interactions between personal and corporate income taxes that substantially reduce multinationals’ profit-shifting activities when substance requirements are implemented as in the European Union or in many OECD countries. 

Paying Taxes Conscientiously: CEO Conscientiousness and the Balancing of Stakeholder Interests


The demand for actively considering the interests of multiple stakeholder groups in corporate decision-making has notably intensified. This shift toward a multistakeholder perspective assigns CEOs a crucial role, challenging them to balance partially competing interests effectively. Despite growing interest among accounting scholars in “CEO effects,” our understanding remains limited regarding which specific traits may predict a particularly diligent balancing of multistakeholder interests. In this study, we propose that CEOs with higher conscientiousness—one of the five fundamental personality traits—exhibit an idiosyncratic tendency to carefully balance the interests of various stakeholder groups because they exhibit a strong sense of responsibility and fairness. Our empirical examination focuses on tax avoidance, an area where corporate stakeholder interests often diverge from broader societal interests. Using data from CEO appointments at S&P 1500 firms, we find that CEO conscientiousness is associated with less tax avoidance. Our results further indicate that situational cues that trigger a more salient societal interest in tax payments amplify the negative association between CEO conscientiousness and tax avoidance. Conversely, cues emphasizing the salience of corporate stakeholder interests in minimizing taxes weaken this association. Overall, our findings suggest that variations in a fundamental CEO personality trait can help in understanding the extent to which CEOs integrate competing stakeholder interests into their decision-making processes.

Work-in-Progress

The Effect of Interest Deduction Limitations on M&As 

Real Effects of Leasing Firms on Local Economic Activity