06/30/2021
By Mary Lou Kelly

The Accounting Department in the Manning School of Business cordially invites you to attend a doctoral dissertation defense by Yiye Zhang on “CEOs' Capital Gains Tax Burden and Earnings Quality.”

Defense Date: Friday, July 16, 2021
Time: 9 a.m. to noon
Location: Zoom Meeting (https://uml.zoom.us/j/95383418317)
Dissertation Title: CEOs’ Capital Gains Tax Burden and Earnings Quality

Dissertation Committee Members:

  • Professor Khondkar Karim (Committee Chair), Department of Accounting, University of Massachusetts Lowell
  • Assistant Professor Huiqi Gan, Department of Accounting, University of Massachusetts Lowell
  • Assistant Professor Heeick Choi, Department of Accounting, University of Massachusetts Lowell
  • Associate Professor Tunde Kovacs, Department of Finance, University of Massachusetts Lowell

Abstract: This study examines how CEOs’ individual tax incentives affect their discretionary reporting incentives and earnings quality. The findings indicate that CEOs’ unrealized capital gains tax liability (tax burden) decreases earnings management activities. The negative association is more pronounced among financially constrained firms than other firms. These results suggest that CEOs’ individual tax friction has an incremental impact on the quality of financial reporting. Further examinations find that CEOs’ tax burden is positively associated with earnings response coefficients and accruals quality. The results of the difference-in-difference approach indicate that the negative association between CEOs’ tax burden and earnings management is diminished after the Job and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Overall, I find that firms have better financial reporting quality when CEOs’ portfolios are locked in their firms’ equity.