Are State Tax Amnesty Programs Associated with Financial Reporting Irregularities?
Grand Valley State University
Nathan Y. Sharp
Texas A&M University - Department of Accounting
Jaron H. Wilde
University of Iowa - Henry B. Tippie College of Business
David A. Wood
Brigham Young University - School of Accountancy
Public Finance Review, 42 (6): 774-799.
This paper investigates the relation between state tax amnesties and financial reporting irregularities. State tax amnesty programs, which potentially signal a lax regulatory enforcement environment, provide a unique setting in which to examine the effects of state tax authorities on non-tax financial reporting behavior. The results suggest that firms headquartered in states offering a tax amnesty program are more likely to begin engaging in a financial reporting irregularity during the amnesty period. Furthermore, the results show that the observed increase in financial reporting irregularities occurs only during periods of repeat, not initial, amnesty programs. These findings suggest state tax amnesties have previously unexplored adverse effects on managers’ behavior.
Number of Pages in PDF File: 37
Keywords: Tax Amnesty, Financial Reporting Irregularities, Tax Authorities, Enforcement
JEL Classification: M41, M48, G38, H20, K34
Date posted: January 27, 2011 ; Last revised: February 5, 2015