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Open Access Publications from the University of California

The Paul Merage School of Business combines the academic strengths and best traditions of the University of California with the cutting-edge, entrepreneurial spirit of Orange County. The School's thematic approach to business education is: sustainable growth through strategic innovation.

Cover page of The Impact of COVID-19 on Volume of Inpatient Hospitalization Through General Medicine and Medicine Subspecialty Services at US Medical Centers.

The Impact of COVID-19 on Volume of Inpatient Hospitalization Through General Medicine and Medicine Subspecialty Services at US Medical Centers.

(2021)

As the coronavirus disease 2019 pandemic continues to impact hospital systems both in the United States and throughout the world, it is important to understand how the pandemic has impacted the volume of hospital admissions. Using the Vizient Inc (Chicago, IL) clinical databases, we analyzed inpatient hospital discharges from the general medicine service and its subspecialty services including cardiology, neonatology, pulmonary/critical care, oncology, psychiatry, and neurology between December 2019 and July 2020. We compared baseline discharge data to that of the first six months of the pandemic, from February to July 2020. We set the baseline as discharges by specialty from February 2019 through January 2020, averaged over the 12 months. Compared to baseline, by April 2020 the volume of general medicine hospital discharge was reduced by -20.2%, from 235,581 to 188,027 discharges. We found that while overall the number of discharges decreased from baseline, with a nadir in April 2020, pulmonary/critical care services had an increase in hospital discharge volume throughout the pandemic, from 7534 at baseline to 15,792 discharges in April. These findings are important for understanding health care use during the pandemic and ensuring proper allocation of resources and funding throughout the coronavirus disease 2019 pandemic.

Cover page of How does the market for corporate control impact tax avoidance? evidence from international M&A laws

How does the market for corporate control impact tax avoidance? evidence from international M&A laws

(2021)

Income taxes are a major expense for profitable corporations, oftentimes 25 percent or more of pretax income. This study exploits a setting – the market for corporate control – to test competing agency-based and risk-based explanations of corporate tax planning. Exploiting the staggered enactment of M&A laws across countries that increased the threat of takeover as an exogenous shock that allows a powerful difference-in-differences design, we find a significant reduction in tax avoidance following the takeover law passage. Our analysis suggests that reduced management private benefits consumption (i.e., rent extraction), rather than managerial effort aversion or increased risk concerns associated with aggressive tax strategies, is the likely mechanism through which takeover laws impact tax avoidance. Collectively, our findings extend the literature by highlighting the role of the corporate control market in shaping cross-sectional variation in corporate tax avoidance.

Cover page of Measuring Corporate Tax Rate and Tax Base Avoidance of U.S. Domestic and U.S. Multinational Firms

Measuring Corporate Tax Rate and Tax Base Avoidance of U.S. Domestic and U.S. Multinational Firms

(2021)

We develop an approach based on publicly available data to decompose and quantify tax avoidance into two separate components: tax rate avoidance and tax base avoidance. Our measures are based on the average statutory tax rate, which accounts for the statutory tax rates across all transactions of a firm. We illustrate and validate our measures using simulation data, the Tax Reform Act of 1986, the Tax Cuts and Jobs Act of 2017, changes in tax rate avoidance and tax base avoidance across time, bonus depreciation time periods, several sample splits of U.S. multinational and domestic firms, differences across industries, and firms operating in tax haven locations. The measures allow regulators and researchers to gain insights into these two conceptually different tax avoidance strategies.

Cover page of Making Theoretically Informed Choices in Specifying Panel-Data Models

Making Theoretically Informed Choices in Specifying Panel-Data Models

(2021)

We argue that in analyzing panel-data econometric models, researchers rely excessively on statistical criteria to determine model specification, treating it primarily as a matter of statistical inference. This inferential emphasis is most obvious in the common practice of using statistical tests (e.g., the Hausman test) to choose between fixed- and random-effects specifications, often ignoring the assumptions underpinning these tests. For instance, the Hausman test depends on the true within-panel (longitudinal) and between-panel (cross-sectional) parameters being equal. This assumption is often not justified, because longitudinal and cross-sectional variances and covariances may manifest different underpinning mechanisms. In addition to different mechanisms often resulting in different variables determining within and between effects, within and between variables may also have different meanings. To help researchers make theoretically informed choices, we formulate five questions that can help researchers think of model specification in a theoretically rigorous way. We examine these issues with examples from both the general management and operations management research. Importantly, we argue that addressing the questions regarding model specification must involve primarily theoretical and contextual judgement, not statistical tests.

Cover page of The Effect of Tax Avoidance Crackdown on Corporate Innovation

The Effect of Tax Avoidance Crackdown on Corporate Innovation

(2020)

To constrain the use of intangible assets in tax-motivated state income shifting and thus crack down on corporate tax avoidance, many U.S. state governments adopted addback statutes. Addback statutes reduce the state tax benefits that firms can gain from creating intangible assets such as patents. Using a large sample of U.S. public firms, we examine the effect of addback statutes on corporate innovation behavior. First, the adoption of addback statutes leads to a 4.77 percentage point decrease in the number of patents and a 5.12 percentage point decrease in the number of patent citations. Second, the “disappearing patents” resulting from addback statutes have significant economic value. Third, after a state adopts an addback statute, a firm with material subsidiaries in that state assigns fewer patents to subsidiaries in zero-tax states, whereas the number of patents that the firm assigns to the other states does not change. Overall, our findings suggest that addback statutes impede corporate innovation.

Cover page of A PLACE IN THE WORLD: VULNERABILITY, WELLBEING, AND THE UBIQUITOUS EVALUATION THAT ANIMATES PARTICIPATION IN INSTITUTIONAL PROCESSES

A PLACE IN THE WORLD: VULNERABILITY, WELLBEING, AND THE UBIQUITOUS EVALUATION THAT ANIMATES PARTICIPATION IN INSTITUTIONAL PROCESSES

(2020)

We explain how and why people become motivated to participate in institutional processes. Responding to recent efforts to address the micro and meso in institutional analysis, we introduce two interrelated constructs, a person’s embodied world of concern and a community’s shared world of concern, which shape how people experience, evaluate, and participate in institutional arrangements. The world of concern, which is the product of people’s sedimented experiences of thriving and suffering, becomes the basis for their commitments to antagonisms towards certain social arrangements. The world of concern, as a lens, sheds light on the complex ways the macro, meso, and micro levels are co-implicated in constructing commitments and attachments that animate action in institutional arenas by providing a new metaphor, one that links the realism of participant concerns to the micro dynamics that underpin institutions. We conclude with a discussion of the implications of these ideas for future research.

Cover page of The Decreasing Trend in U.S. Cash Effective Tax Rates: The Role of Growth in Pre-tax Income

The Decreasing Trend in U.S. Cash Effective Tax Rates: The Role of Growth in Pre-tax Income

(2020)

We develop a linear corporate tax function where taxes paid are regressed on pre-tax income and an intercept. We show that if the intercept is positive, cash ETRs are a convex function of pre-tax income. We present large sample evidence consistent with this ETR-convexity. Thus, although firms may have stable linear tax functions (i.e., constant parameters in the linear tax model) representing stable tax avoidance behavior, ETRs can change over time because of growth in pre-tax income. Consequently, simply examining changes (or differences) in cash ETRs is nondiagnostic about whether tax avoidance has changed over time (or differs across firms). We illustrate our argument by showing that all of the observed downward trend in cash ETRs documented by Dyreng et al. (2017) can be explained by growth in pre-tax income. The wholesale concern about increased tax avoidance over time might be overstated.

Cover page of An overview of academic tax accounting research drawing on U.S. multinational taxation

An overview of academic tax accounting research drawing on U.S. multinational taxation

(2020)

Economics-based tax research in accounting draws heavily on the Scholes and Wolfson framework. The framework develops a global approach to tax planning where all parties, all taxes, and all costs are to be considered in effective tax planning. Effective tax planning is distinct from tax minimization as the goal of the former is to maximize the after-tax rate of return. The first empirical applications of the framework followed the passage of the Tax Reform Act of 1986. Taxation of multinationals has long been of interest to accounting (and other) researchers and continues to be of interest. The Tax Cuts and Jobs Act of 2017 changed many tax laws including how the U.S. taxes U.S. multinationals. Research examining the ramifications of this latest Tax Act is already well under way.

Cover page of ¬The Effects of Tax Avoidance News on Employee Perceptions of Managers and Firms: Evidence from Glassdoor.com Ratings

¬The Effects of Tax Avoidance News on Employee Perceptions of Managers and Firms: Evidence from Glassdoor.com Ratings

(2020)

We examine whether employee perceptions of managers and firms fall following tax avoidance news. Using S&P 500 firms and generalized difference-in-differences specifications, we find that tax avoidance news negatively affects employee perceptions of managers and firms. In cross-sectional tests, we find that (1) firms and managers in consumer-facing industries suffer larger employee-related perception changes from tax avoidance news compared to other firms, and (2) well-performing firms and their managers face smaller perception changes than other firms and managers. Overall, our results are consistent with tax avoidance news negatively affecting employee perceptions of managers and firms.