Strategic Subsidiary Disclosure

Journal of Accounting Research, Volume 58, Issue 3, 2020

Posted: 2 Jul 2020

See all articles by Scott Dyreng

Scott Dyreng

Duke University - Accounting

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS)

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2020

Abstract

Although subsidiary disclosures in firms’ filings with the Securities and Exchanges Commission (SEC; Exhibit 21) represent the most granular required public disclosure of a firm's geographic footprint, little is understood about the quality of the disclosure, and anecdotal evidence suggests firms may not fully comply with the disclosure requirements. We use data provided by multinational firms to the Internal Revenue Service regarding their foreign subsidiary locations to explore the accuracy of public subsidiary disclosures on Exhibit 21 of Form 10‐K per SEC rules. The overall incidence of nondisclosure is low, suggesting that most firms comply with Exhibit 21 disclosure rules, and that for most applications, Exhibit 21 disclosures provide a reasonable proxy for locations of significant subsidiaries. Nevertheless, there is some evidence of nondisclosure, particularly when subsidiaries are in tax havens, when the firm is more highly scrutinized in the media, or when the firm has other characteristics consistent with low‐quality disclosures such as SEC comment letters.

Keywords: financial disclosure; corporate tax; reputational costs of tax planning

JEL Classification: H25; H26; M41; M48

Suggested Citation

Dyreng, Scott and Hoopes, Jeffrey L. and Langetieg, Patrick and Wilde, Jaron H., Strategic Subsidiary Disclosure (June 1, 2020). Journal of Accounting Research, Volume 58, Issue 3, 2020, Available at SSRN: https://ssrn.com/abstract=3623392

Scott Dyreng

Duke University - Accounting ( email )

Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States

Jeffrey L. Hoopes (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS) ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business ( email )

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5020 Main Library
Iowa City, IA 52242-1000
United States

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