We compare executive equity incentives of firms accused of accounting fraud by the Securities and Exchange Commission (SEC) during the period 1996-2003 to two samples of firms not accused of fraud. We measure equity incentives in a variety of ways and employ a battery of empirical tests. We find...

We analyze a sample of firms accused of fraudulently overstating their earnings and examine the extent, if any, to which they paid additional income taxes on the allegedly fraudulent earnings. Based on restatements of current tax expense adjusted for the tax benefits of stock options, the...

Trust preferred stock, first issued in 1993, was engineered to be treated as preferred stock for financial statement purposes and as debt for tax purposes (i.e., payments on trust preferred stock are deductible by the issuer). Our analyses exploit the features of trust preferred stock to shed...

Implicit taxes reflect the extent (if any) to which tax-favored assets bear lower pretax returns than do tax-disfavored assets of similar risk. Prior research on implicit taxes has met with mixed results, particularly in equity securities, because of the difficulty in separating tax effects from...

This paper examines debt-equity hybrid securities whose existence and popularity appear to be due to their favorable accounting and tax treatment. Marketed under names such as Monthly Income Preferred Securities (MIPS), these securities are treated as equity-like for financial reporting and...

We investigate the backdating of stock option exercises. Before SOX, we find evidence that some exercises were backdated to days with low stock prices. Consistent with a tax-based incentive, these suspect exercises are more likely when the personal tax savings from backdating are higher....

Recently, several studies have concluded that individual investor level dividend taxes on corporate retained earnings are impounded in common stock prices, independent of the timing of dividend payments. We show that the model underlying these studies is internally inconsistent. We also discuss...

The purpose of this paper is to evaluate the model used by Harris and Kemsley (1999), Harris, Hubbard and Kemsley (2001) and Collins and Kemsley (2000), hereafter CHHK, and to investigate their empirical results. We demonstrate that the model underlying CHHK is flawed, and show that their...

This paper examines the extent, if any, to which firms pay additional income taxes on allegedly fraudulent earnings. Our sample consists of firms that restated their financial statements in conjunction with SEC allegations of accounting fraud during the years 1996 to 2002. By examining firms...

Trust preferred stock, first issued in 1993, was engineered to be treated as preferred stock for financial statement purposes and as debt for tax purposes (i.e., payments on trust preferred stock are deductible by the issuer). Our analyses exploit the features of trust preferred stock to shed...