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Tax Avoidance and Earnings Management
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Tax Avoidance and Earnings Management

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Business and Entrepreneurship".

Deadline for manuscript submissions: 30 June 2025 | Viewed by 836

Special Issue Editor

Dr. Hyun A. Hong

E-Mail Website
Guest Editor
School of Business, University of California, Riverside, CA 92521, USA
Interests: innovation; corporate governance; regulation changes; tax planning activities

Special Issue Information

Dear Colleagues,

We are pleased to announce a Special Issue of the Journal of Finance and Risk Management focused on the intersection of tax avoidance and earnings management. As tax regulations evolve both in the global and the U.S. markets and the scrutiny of corporate financial practices intensifies, understanding the relationship between these two phenomena is more important than ever. Tax avoidance and earnings management are two universal corporate practices that have significant implications for financial reporting, corporate governance, and the broader economy. While these activities are often considered separately, there is a growing recognition of their interconnectedness. This Special Issue seeks to delve into the dynamic relationship between tax avoidance and earnings management, examining their underlying motivations, strategies, and consequences.

The scope of the Special Issue:

We invite original research papers that explore various aspects of tax avoidance and earnings management including but not limited to the following topics:

  • The impact of tax strategies on financial reporting and earnings quality.
  • Behavioral factors influencing managerial decisions related to tax and earnings management.
  • The role of corporate governance in mediating tax and earnings practices.
  • Cross-country comparisons of tax avoidance and earnings management strategies.
  • The implications of regulatory changes on corporate practices.
  • Empirical studies examining the effects of tax avoidance on firm performance.

Dr. Hyun A. Hong
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • tax planning activities
  • financial reporting quality
  • IRS monitoring
  • manager’s incentives

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Further information on MDPI's Special Issue policies can be found here.

Published Papers (2 papers)

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Research

29 pages, 372 KiB  
Article
The Role of Tax Planning Incentives in the Use of Earnouts in Taxable Acquisitions
by Dennis Ahn and Terry Shevlin
J. Risk Financial Manag. 2025, 18(5), 253; https://doi.org/10.3390/jrfm18050253 - 7 May 2025
Viewed by 72
Abstract
In an acquisition, an earnout is a component of transaction price that is contingent upon future events. Despite its usefulness to acquirers in mitigating valuation risk, using an earnout also has a potentially undesirable tax consequence for the acquirer because there is no [...] Read more.
In an acquisition, an earnout is a component of transaction price that is contingent upon future events. Despite its usefulness to acquirers in mitigating valuation risk, using an earnout also has a potentially undesirable tax consequence for the acquirer because there is no immediate step-up in tax basis for the earnout portion of deal consideration until the resolution of associated contingencies. We thus hypothesize that acquiring firms with high marginal tax rates (MTRs) are less likely to use earnouts. We analyze a sample of taxable acquisitions by U.S. public companies, holding constant other non-tax determinants of earnout use from prior research, and we find results consistent with our prediction. We also find some evidence that strong tax incentives can offset the effect of target valuation uncertainty, suggesting that acquiring firms facing sufficiently high MTRs are willing to trade off mitigating valuation risk for a full, immediate step-up in tax basis. We contribute to the prior literature on determinants of earnout use as well as the role of tax planning incentives in firm choices within mergers and acquisitions. Full article
(This article belongs to the Special Issue Tax Avoidance and Earnings Management)
25 pages, 2161 KiB  
Article
Determinants of the Financing Mechanisms of Decentralization in Togo
by Essossinam Pali, Coffi Cyprien Aholou and François Paul Yatta
J. Risk Financial Manag. 2025, 18(4), 178; https://doi.org/10.3390/jrfm18040178 - 27 Mar 2025
Viewed by 245
Abstract
Since 2019, Togo has been strengthening financial decentralization through municipalization and the election of municipal councilors. Municipal financial autonomy is a key driver of local governance, allowing municipalities to mobilize their own resources, manage tax and non-tax revenues, and implement development projects. However, [...] Read more.
Since 2019, Togo has been strengthening financial decentralization through municipalization and the election of municipal councilors. Municipal financial autonomy is a key driver of local governance, allowing municipalities to mobilize their own resources, manage tax and non-tax revenues, and implement development projects. However, despite a legal framework governing local taxation, Togolese municipalities continue to face chronic financial constraints that limit their ability to finance public services and infrastructure. This study examines the mechanisms of financial decentralization in Togo and their contribution to municipal budgets. Using a quantitative approach that combines documentary analysis and interviews with 188 experts and practitioners in local finance, the study identifies the following four primary financing mechanisms: local, national, community-based and international. Among these, own revenues, including tax revenues, non-tax revenues, and revenues from the provision of services, together with government transfers through the Local Authorities Support Fund (FACT) are the main sources of local government finance. However, the results show that several legally defined fiscal instruments remain underutilized or outdated in many municipalities, significantly limiting their effectiveness in mobilizing resources. These results highlight the need to optimize fiscal decentralization strategies in order to strengthen the financial autonomy of municipalities and support sustainable territorial development. Full article
(This article belongs to the Special Issue Tax Avoidance and Earnings Management)
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