The Importance of IRS Enforcement to Stock Price Crash Risk: The Role of CEO Power and Incentives
研究发现IRS审计威胁与股价崩盘风险负相关，表明税务执法能约束经理人隐藏坏消息，尤其当CEO权力大、激励强时，这种外部监督对股东的保护作用更显著。
ABSTRACT We analyze whether tough IRS monitoring generates a positive externality by constraining managers' bad news hoarding activities. Supporting this prediction, we find a negative relation between the threat of an IRS audit and stock price crash risk. Our evidence is consistent with recent theory that outside investors learn more about firms when tax enforcement is stricter. Additionally, path analysis suggests that the monitoring channel (direct path) plays a critical role in shaping crash risk relative to information asymmetry channels of tax planning and accruals manipulation (indirect paths). Consistent with other predictions, we find that the monitoring role of IRS audits intensifies when firms experience worse agency conflicts stemming from CEO power and incentives. Collectively, our research implies that external monitoring by tax authorities protects shareholders against managers suppressing negative firm-specific information that engenders stock price crash risk, particularly when CEOs have wider scope and stronger incentives to hoard bad news.