How do hedge fund activists use and affect financial reporting of income taxes? Evidence from the valuation allowance for deferred tax assets
研究发现对冲基金积极主义者会瞄准有递延所得税资产估值准备的公司，并在介入后促使公司释放该准备，这源于税收规避策略和财务报告变化，而非经营业绩改善。
Abstract This study uses valuation allowances (VAs) for deferred tax assets to examine whether hedge fund activists (HFAs) use and affect financial reporting of income taxes. Specifically, we investigate whether HFAs target firms with VAs and whether target firms are more likely to release VAs post‐intervention. We find that the existence, magnitude, and increases in VAs increase the marginal probability that HFAs will target a firm by between 12% and 24%. We also find that target firms are 4.6% more likely to release VAs following the intervention, and this effect persists for up to 2 years. Releases of VAs appear to stem from implemented tax avoidance strategies and changes in financial reporting of income taxes rather than real changes in operating performance or earnings management. Overall, HFAs appear to understand the interplay between tax planning and financial reporting of income taxes and use both to unlock value in target firms.