دانلود رایگان مقاله اسناد اظهار نظر SEC مربوط به درآمد سرمایه گذاری مجدد به طور دائم

Abstract

In this paper, we examine how permanently reinvested earnings (PRE) and disclosure transparency surrounding PRE influences external monitoring from the Securities and Exchange Commission (SEC). Our research is motivated by increased congressional and SEC scrutiny into companies with substantial PRE via their foreign operations. We hypothesize that firms are more likely to receive a PRE-related comment letter if they have large amounts of PRE, a large estimated hypothetical tax on repatriation, increases in PRE, and have less transparent disclosures related to the hypothetical tax on PRE. We find that the estimated hypothetical tax on repatriation and the transparency of PRE disclosures are determinants of receiving a PRE-related comment letter. Further analysis shows that cash-constrained firms with a large estimated hypothetical tax on repatriation are more likely to receive a PRE-related comment letter. Our research contributes to a growing body of research into the external monitoring role of the SEC in the form of comment letters.

5. Conclusion

In this paper, we examine how PRE and disclosure transparency surrounding PRE influences external monitoring from the Securities and Exchange Commission (SEC). Specifically, for firms with PRE, we examine the determinants of receiving a PRE-related comment letter from the SEC. While prior research such as Cassell et al. (2013) has examined the determinants of receiving an SEC comment letter, little research has been conducted on SEC comment letters specifically related to tax disclosures. Kubick et al. (2016) find that firms with greater tax avoidance are more likely to receive an SEC comment letter and that these firms subsequently reduce their levels of tax avoidance. Prior research of Krull (2004) demonstrates that managers use PRE to manage earnings to meet a benchmark. Furthermore, Eiler and Kutcher (2014) find that managers exercise discretion in their disclosure transparency related to the unrecognized deferred tax liability on hypothetical repatriations of PRE. Thus, managers utilize flexibility in their disclosures decisions surrounding PRE to meet earnings benchmarks and reduce transparency