Tax Reporting Behavior Under Audit Certainty

This study uses a confidential data set of firms assigned to the Internal Revenue Service's Coordinated Industry Case (CIC) program to examine the effect of audit certainty on firms' tax reporting behavior. We first model the determinants of assignment to the program. Although the ability and incentive to avoid taxes are related to CIC assignment, we find that the IRS assigns firms primarily based on size and complexity. We then test whether audit certainty has a detectable effect on tax payments. Our results show that tax payments do not change when firms enter the CIC program, suggesting the CIC program does not have higher deterrence or enforcement effects relative to the IRS's standard selection and audit process for large corporations not included in the CIC program. However, supplemental analysis suggests that audit certainty does alter managers' expectations regarding future tax payments. Our paper provides new empirical evidence on the strategic game between the taxpayer and the tax authority and has important implications for tax authorities as they consider the costs and benefits of certain audit programs.     

Ethical Decision-Making by Consumers: The Roles of Product Harm and Consumer Vulnerability

The primary purpose of this study was to examine the effects of perceptions of product harm and consumer vulnerability on ethical evaluations of target marketing strategies. We first established whether subjects are able to accurately judge the harmfulness of a product through labeling alone, and whether they could differentiate consumers who were more or less vulnerable. The results suggest that without the presence of a prime, subjects who depended on implicit memory or guess were able to detect differences in “sin” and “non-sin” products and consumer vulnerability, but were far less likely to be able to distinguish among high and low levels of product harm and consumer vulnerability. The inability to accurately identify high and low levels of product harm and consumer vulnerability impacted their perceptions of the ethicality of target marketing strategies, such that only four out of 18 target marketing strategies were judged as unethical. Thus, our findings contradict previous research that found subjects judged many more of the integrated strategies as unethical [Smith and Cooper-Martin, J Market 61(1997) 1]. Our results suggest that assessing ethical evaluations of strategies varying in product harm, and consumer vulnerability may only be relevant if consumers can accurately identify product harm.     

Charitable giving expenditures and the faith factor

Using a permanent income hypothesis approach and an income-giving status interaction effect, a double hurdle model provides evidence of significant differences from the impact of household income and various household characteristics on both a household's likelihood of giving and its level of giving to religion, charity, education, others outside the household, and politics. An analysis of resulting income elasticity estimates revealed that households consider religious giving a necessity good at all levels of income, while other categories of giving are generally found to be luxury goods. Further, those who gave to religion were found to give more to education and charity then those not giving to religion, and higher education households were more likely to give to religion than households with less education. This analysis suggests that there may be more to religious giving behavior than has been assumed in prior studies and underscores the need for further research into the motivation for religious giving. Specifically, these findings point to an enduring, internal motivation for giving rather than an external, “What do I get for what I give,” motive.     

How Reliably Do Empirical Tests Identify Tax Avoidance?

Research on the determinants of tax avoidance have relied on tests using GAAP and cash effective tax rates (ETRs) and total and permanent book-tax differences. Two new proxies have emerged that overcome documented limitations of these proxies: one, developed by Henry and Sansing (2018), allows for more meaningful interpretation of results estimated in samples that include loss observations. The other, reserves for unrecognized tax benefits (UTB), provides new data on tax uncertainty. We offer empirical evidence on how well tests using these new proxies perform relative to those extensively used in prior research. The paper finds that tests using the proxy developed by Henry and Sansing (2018) have lower power relative to those using other proxies across all samples, including a sample that includes loss observations. In contrast, when firms accrue reserves for uncertain tax avoidance, tests using the current-year addition to the UTB have the highest power across all proxies, samples, and levels of reserves. In the absence of reserves, tests using the GAAP ETR best detect uncertain tax avoidance, on average. This study contributes to the literature by using a controlled environment to provide the first large-scale empirical evidence on how the power of tests varies with the use of relatively new proxies, the inclusion of loss observations, and the advent of FIN 48.     

Legislated Ethics or Ethics Education?: Faculty Views in the Post-Enron Era

The tension between external forces for better ethics in organizations, represented by legislation such as the Sarbanes–Oxley Act (SOX), and the call for internal forces represented by increased educational coverage, has never been as apparent. This study examines business school faculty attitudes about recent corporate ethics lapses, including opinions about root causes, potential solutions, and ethics coverage in their courses. In assessing root causes, faculty point to a failure of systems such as legal/professional and management (external) and declining personal values (internal). We also found that faculty recommend external forces as a remedy more often than increased ethics educational coverage; we contextualize this finding with recent ethics education literature. We conclude by proposing that neither legislation nor ethics education alone are complete when addressing widespread unethical corporate acts and offer a multi-faceted approach to ethics educational opportunities. Jeri Mullins Beggs is an Assistant Professor of Marketing at Illinois State University. She earned her Ph.D. in marketing at Saint Louis University. Her current research interests are ethics education, health care marketing, and social marketing. Her work has been presented and published at various conferences and journals including most recently the Journal of Management Education, Marketing and Public Policy conference and the Consumer Satisfaction, Dissatisfaction, and Complaining Behavior conference. She also recently served as co-editor of a special issue of Journal of Management Education on Teaching Business ethics. Kathy Lund Dean is a member of the management department at Idaho State University. She earned her Ph.D. in organizational behavior and philosophy from Saint Louis University. Her current research interests lie in operationalizing non-traditional research methodologies, immersion pedagogies such as service-learning, and spiritual wholeness and authenticity in work place. Her research has appeared in multiple journals including Journal of Management Education, Journal of Management, Spirituality, and Religion, Journal of Organizational Change Management, International Journal of Public Administration, and Academy of Management Executive. She serves as the Associate Editor for the Journal of Management Education.     

Conflicting Transfer Pricing Incentives and the Role of Coordination

Our study evaluates the role of coordination, at both the government and the firm level, on the transfer prices set by U.S. multinational corporations (MNCs) when income taxes and duties cannot be jointly minimized with a single transfer price. We find that either the presence of a coordinated income tax and customs enforcement regime or coordination between the income tax and customs functions alters transfer prices for these firms. Our analyses have implications for both firms and taxing authorities. Specifically, our findings suggest that MNCs might decrease their aggregate tax burdens by increasing coordination within the firm or that governments might increase their aggregate revenues by improving coordinating enforcement across taxing authorities. Our study is novel in that we document, in a specific setting, how coordination influences MNCs’ tax reporting behavior.     

The robustness of maximum likelihood and distribution-free estimators to non-normality in confirmatory factor analysis

The present Monte Carlo compares the estimates produced by maximum likelihood (ML) and asymptotically distribution-free (ADF) methods. The study extends prior research by investigating the combined effects of sample size, magnitude of correlation among observed indicators, number of indicators, magnitude of skewness and kurtosis, and proportion of indicators with non-normal distributions. Results indicate that both ML and ADF showed little bias in estimates of factor loadings under all conditions studied. As the number of indicators in the model increased, ADF produced greater negative bias in estimates of uniquenesses than ML. In addition, the bias in standard errors for both ML and ADF estimation increased in models with more indicators, and this effect was more pronounced for ADF than ML. Increases in skewness and kurtosis resulted in greater underestimating of standard errors; ML standard errors showed greater bias than ADF under conditions of non-normality, and ML chi-square statistics were also inflated. However, when only half the indicators departed from normality, the inflation in ML chi-square decreased.     

Mid-level Managers,Organizational Context,and (Un)ethical Encounters

This article details day-to-day ethics issues facing MBAs who occupy entry-level and mid-level management positions and offers defined examples of the stressors these managers face. The study includes lower-level managers, essentially excluded from extant literature, and focuses on workplace behaviors both undertaken and observed. Results indicate that pressures from internal organization sources, and ambiguity in letter versus spirit of rules, account for over a third of the most frequent unethical situations encountered, and that most managers did not expect to face those issues. Various contextual factors accounted for 32% of the organizational factors that affected decisions. We discuss implications for the workplace, especially the unique ethics challenges for newer managers.     

Service Quality Expectations: Exploring the Importance of SERVQUAL Dimensions from Different Nonprofit Constituent Groups

Given the multiplicity of “customers” in the nonprofit sector, the need for nonprofits to ensure that quality service delivery matches customer expectations is difficult yet paramount. Nonprofit organizations serve several constituent groups: the service recipient, donor, volunteer, and general public at large. While each constituent group may not be perceived as a customer in the general sense, each group is making quality assessments that may affect performance evaluations, donations, volunteerism, and brand equity decisions. Hypothesis support was found, distinguishing between the importance of the different SERVQUAL dimensions and the perspective roles played within the nonprofit scenarios. Respondents playing the role of volunteer rated Empathy and Assurance highest and Tangibles lowest. Respondents playing the role of donor rated Reliability and Tangibles highest and Empathy lowest. Respondents playing the role of recipients rated Empathy and Responsiveness highest and Tangibles lowest. Finally, respondents playing the role of volunteer rated Assurance and Reliability highest and Tangibles lowest.