Legal Enforcement and Corporate Behavior: An Analysis of Tax Aggressiveness after an Audit

Jason DeBacker (), Bradley Heim, Anh Tran and Alexander Yuskavage

Journal of Law and Economics, 2015, vol. 58, issue 2, 291 - 324

Abstract: Contrary to common expectations, legal enforcement may increase subsequent corporate misbehavior. Using Internal Revenue Service and financial statement data, we find that corporations gradually increase their tax aggressiveness for a few years following an audit and then reduce it sharply. We show that this U-shaped impact is consistent with strategic responses on the part of firms and with Bayesian updating of audit risk. This adverse effect on corporate behavior calls for a reexamination of both the theory and policy of legal enforcement.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://dx.doi.org/10.1086/684037 (application/pdf)
http://dx.doi.org/10.1086/684037 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:doi:10.1086/684037

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().