Tax Authority Attention and Financial Reporting
Iftekhar Hasan, Tahseen Hasan, Kose John
International Journal of Banking, Accounting and Finance,
forthcoming
Abstract
We study the effects of Tax Authority (IRS) attention on a firm’s financial reporting. We explore whether firms institute a higher degree of accounting conservatism in response to IRS monitoring. Using data on IRS acquisition of public firms’ 10-K financial disclosures to proxy for IRS attention, we find that when firms are under IRS attention, they tend to initiate higher levels of unconditional and, to some extent, conditional accounting conservatism. We alleviate some of the endogeneity concerns by using pre- and post-IRS attention environments between the treated group (firms with IRS attention) and a propensity score that matches the control group of firms (no IRS attention). These results withstand several robustness tests and subsample analyses.
Read article
Going Public and the Internal Organization of the Firm
Daniel Bias, Benjamin Lochner, Stefan Obernberger, Merih Sevilir
Journal of Finance,
forthcoming
Abstract
We examine how firms adapt their organization when they go public. To conform with the requirements of public capital markets, we expect IPO firms to become more organized, making the firm more accountable and its human capital more easily replaceable. We find that IPO firms transform into a more hierarchical organization with smaller departments. Managerial oversight increases. Organizational functions dedicated to accounting, finance, information and communication, and human resources become much more prominent. Employee turnover is sizeable and directly related to changes in hierarchical layers. New hires are better educated, but younger and less experienced than incumbents, which reflects the staffing needs of a more hierarchical organization. Wage inequality increases as firms become more hierarchical. Overall, going public is associated with a comprehensive transformation of the firm's organization which becomes geared towards efficiently operating a public firm.
Read article
The (Heterogeneous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner, Javier Miranda
Management Science,
forthcoming
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 12% over two years after buyouts of publicly listed firms—on average, and relative to control firms—but expands 15% after buyouts of privately held firms. Postbuyout productivity gains at target firms are large on average and much larger yet for deals executed amid tight credit conditions. A postbuyout tightening of credit conditions or slowing of gross domestic product growth curtails employment growth and intrafirm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms. We relate these findings to theories of private equity that highlight agency problems at portfolio firms and within the private equity industry itself.
Read article
Social Connections and Information Leakage: Evidence from Target Stock Price Run-up in Takeovers
Iftekhar Hasan, Lin Tong, An Yan
Journal of Financial Research,
forthcoming
Abstract
Does information leakage in a target's social networks increase its stock price prior to a merger announcement? Evidence reveals that a target with more social connections indeed experiences a higher pre-announcement price run-up. This effect does not exist during or after the merger announcement, or in windows ending two months before the announcement. It is more pronounced among targets with severe asymmetric information, and weaker when the information about the upcoming merger is publicly available prior to the announcement. It is also weaker in expedited deals such as tender offers.
Read article
Understanding CSR Champions: A Machine Learning Approach
Alona Bilokha, Mingying Cheng, Mengchuan Fu, Iftekhar Hasan
Annals of Operations Research,
forthcoming
Abstract
In this paper, we study champions of corporate social responsibility (CSR) performance among the U.S. publicly traded firms and their common characteristics by utilizing machine learning algorithms to identify predictors of firms’ CSR activity. We contribute to the CSR and leadership determinants literature by introducing the first comprehensive framework for analyzing the factors associated with corporate engagement with socially responsible behaviors by grouping all relevant predictors into four broad categories: corporate governance, managerial incentives, leadership, and firm characteristics. We find that strong corporate governance characteristics, as manifested in board member heterogeneity and managerial incentives, are the top predictors of CSR performance. Our results suggest policy implications for providing incentives and fostering characteristics conducive to firms “doing good.”
Read article
14.05.2025 • 16/2025
Private ownership boosts hospital performance
New research by the Halle Institute for Economic Research (IWH) and ESMT Berlin shows that private equity (PE) acquisitions lead to substantial operational efficiency gains in hospitals, challenging common public concerns. The study reveals that hospitals acquired by PE firms significantly reduce costs and administrative staff without increasing closure rates or harming patient care.
Merih Sevilir
Read
Stellungnahme "Rentner entlasten" anlässlich der öffentlichen Anhörung des Ausschusses für Soziales, Gesundheit und Gesellschaftlichen Zusammenhalt im Sächsischen Landtag
Oliver Holtemöller, Götz Zeddies
IWH Policy Notes,
No. 2,
2025
Abstract
Mit Antrag vom 11. März 2025 fordert die BSW-Fraktion im Sächsischen Landtag, gesetzliche Renten bis zu einer Höhe von 2.000 Euro im Monat steuerlich freizustellen, um die hohen Preissteigerungen der vergangenen Jahre für diese Personengruppe auszugleichen. Ein Blick auf die Einkommenssituation von Rentnern und Arbeitnehmern zeigt allerdings, dass ein Fokus allein auf die gesetzliche Rente zu kurz greift, weil Rentnerhaushalte im Durchschnitt über weitere Einnahmequellen verfügen. Zudem müssten die Einnahmeausfälle gegenfinanziert werden, wodurch andere gesellschaftliche Gruppen zusätzlich belastet würden. Schließlich würde die steuerliche Freistellung von niedrigen und mittleren Renteneinkommen deren Empfänger gegenüber Arbeitnehmern besserstellen. Auch die Arbeitsanreize für Ältere würden gemindert. Mit der Grundsicherung im Alter steht ein zielgenaueres Instrument zur Unterstützung bedürftiger Haushalte zur Verfügung.
Read article
10.04.2025 • 13/2025
Joint Economic Forecast 1/2025: Geopolitical turn intensifies crisis – structural reforms even more urgent
The German economy will continue to tread water in 2025. In their spring report, the leading economic research institutes forecast an increase in gross domestic product of just 0.1% for the current year. For 2026, the institutes expect gross domestic product to increase by 1.3%. In the short term, the new US trade policy and economic policy uncertainty are weighing on the German economy. The additional scope for public debt should gradually have an expansionary effect, but threatens to crowd out private consumption and private investment.
Oliver Holtemöller
Read
IWH-Tarif-Check: Keine realen Netto-Tariflohnzuwächse für Beschäftigte im Öffentlichen Dienst
Oliver Holtemöller, Birgit Schultz
IWH-Tarif-Check,
No. 1,
2025
Abstract
*** Steigende Sozialabgaben und Inflation fressen Gehaltsplus der Beschäftigten bei Bund und Kommunen auf *** Die Tarifvertragsparteien des Öffentlichen Dienstes von Bund und Kommunen haben sich am vergangenen Wochenende auf einen neuen Tariflohnabschluss mit einer Laufzeit von 27 Monaten geeinigt: Demnach steigen im April 2025 die Löhne um 3,0%, jedoch mindestens um 110 Euro je Monat. Im Mai 2026 gibt es dann nochmals eine Tariflohnerhöhung um 2,8% sowie eine Erhöhung der Jahressonderzahlung und ab 2027 einen zusätzlichen Urlaubstag.
Read article
Corporate Loan Spreads and Economic Activity
Anthony Saunders, Alessandro Spina, Sascha Steffen, Daniel Streitz
Review of Financial Studies,
No. 2,
2025
Abstract
We use secondary corporate loan-market prices to construct a novel loan-market-based credit spread. This measure has considerable predictive power for economic activity across macroeconomic outcomes in both the U.S. and Europe and captures unique information not contained in public market credit spreads. Loan-market borrowers are compositionally different and particularly sensitive to supply-side frictions as well as financial frictions that emanate from their own balance sheets. This evidence highlights the joint role of financial intermediary and borrower balance-sheet frictions in understanding macroeconomic developments and enriches our understanding of which type of financial frictions matter for the economy.
Read article