Under the current U.S. tax system, corporations have an incentive to defer the repatriation of their foreign earnings. This incentive is commonly referred to as the lock-out effect. The lock-out effect is significant, as estimates indicate that U.S. corporations hold nearly $2 trillion of...

Using absorption costing, manufacturing firms can manipulate production (relative to sales) to shift fixed costs between cost of goods sold and inventory accounts, thereby managing earnings either upward or downward. Considering two earnings targets (avoiding losses and consensus analyst...