Are State Tax Amnesty Programs Associated with Financial Reporting Irregularities?

This article 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 finan...

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Bibliographic Details
Published in:Public finance review 2014-11, Vol.42 (6), p.774-799
Main Authors: Buckwalter, Neal D., Sharp, Nathan Y., Wilde, Jaron H., Wood, David A.
Format: Article
Language:English
Subjects:
Accounting irregularities
Amnesties
Amnesty
Authority
Financial reporting
Law enforcement
Managers
Regulation
State
State taxes
Studies
Tax regulations
Taxes
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Summary:This article 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.
ISSN:1091-1421
1552-7530
DOI:10.1177/1091142113499397