Donna D. Bobek

A comparison of the association between corporate social responsibility and executive compensation: United States versus Canada

Prior research shows different associations between corporate social responsibility (CSR) and executive compensation in the United States versus Canada (i.e., McGuire et al., 2003; Mahoney & Thorne, 2006). It follows that these cross-national differences may be attributable to: (1) different compensation strategies; (2) other national differences; or (3) differences in the sampling and measurement techniques used in the respective studies. To gain insight into the factors underlying the cross-national differences, our study uses a single statistical approach on a U.S./Canada database to compare the association between CSR and executive compensation while controlling for size, industry, financial structure, and using common measures of salary, bonus and long-term compensation (LTC). We find that after controlling for size there are no differences in the association between executive compensation and CSR between the United States and Canada, and that LTC is positively associated with CSR in both countries. Thus, our findings suggest that previously reported differences in CSR between the United States and Canada are likely due to differences in the size of the firms used in the samples from the respective countries. Furthermore, our findings show the importance of the association between LTC and CSR for both the U.S. and the Canadian context. Implications of these findings are discussed.

The Influence of State Sales and Use Taxes on Manufacturers’ Capital Expenditures and Employment:

This study investigates the relationship between the state sales and use tax (SUT) burden and manufacturing firms’ employment and capital expenditures for the period 1983–2006. Using an instrumental variable model, our results indicate that the SUT burden (i.e., the product between the sales and use tax rate and sales and use tax exemptions) on purchases of materials and machinery is related to changes in capital expenditures and employment, even after controlling for corporate income tax variables and other economic factors. The economic impact of this relationship is relatively small; however, the results have important policy implications in the present lean state budget environment, as state legislators must balance revenue needs with the desire to provide economic development incentives.

DETERMINANTS OF TAX PROFESSIONALS’ ADVICE AGGRESSIVENESS AND FEES

Prior research has identified a number of variables that influence tax professionals’ judgments. However, these variables have usually been examined in isolation. This study has two main findings. First, using a structured questionnaire that allows for the collection of variables related to actual tax planning engagements, this study validates the findings of numerous laboratory studies using factor and regression analysis. Factors representing risks and rewards associated with the client and the IRS, along with task characteristics and client aggressiveness significantly affect the aggressiveness of tax advice given to clients. Second, tax professionals do not appear to charge a premium for aggressive tax advice. However, regarding the fee charged, a significant gender effect is found even after controlling for time spent on the engagement, experience, firm size and education.

PROFESSIONAL LIABILITY SUITS AGAINST TAX ACCOUNTANTS: SOME EMPIRICAL EVIDENCE REGARDING CASE MERIT

As with most professional service occupations, liability claims are a major concern for accounting professionals. Most of the academic research on accountants’ professional liability has focused on audit services. This study extends research on accountants’ professional liability by examining liability claims arising from the provision of tax services. In addition to a descriptive analysis, the current study explores the role of merit in tax malpractice litigation. Hypotheses are developed based on the legal construct of claim merit, which requires the presence of accountant error and damages as a result of that error for a claim to be considered meritorious. The hypotheses are tested using logistic and OLS regression of 89 actual claims filed with an insurer of tax professionals. The results suggest that the components of merit are significant in determining both the presence of compensatory payments to the client and the dollar amount of those payments, although the hypothesized interaction effect is only significant for the dollar amount of compensatory payments.