Journal
ACCOUNTING REVIEW
Volume 86, Issue 1, Pages 23-57Publisher
AMER ACCOUNTING ASSOC
DOI: 10.2308/accr.00000008
Keywords
tax shelters; tax aggressiveness; corporate reporting; diffusion; institutional isomorphism; board interlocks
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This study investigates the spread of aggressive corporate tax reporting by modeling a firm's decision to adopt the corporate-owned life insurance (COLI) shelter. Prior studies identify firm characteristics associated with aggressive tax reporting (Desai and Dharmapala 2006; Frank et al. 2009) and tax shelter participation (Wilson 2009; Lisowsky 2010). This study examines whether social environment factors explain the pattern of tax shelter adoption. Building on theory related to the diffusion of innovations and institutional isomorphism, I hypothesize direct and indirect ties between prior and potential shelter adopters influence the spread of shelter use. I find that network ties via board interlocks increase the likelihood of adopting the COLI shelter. I also find weak evidence that COLI use spreads geographically. However, I find no evidence that the spread of COLI use is concentrated among a particular set of audit firms or industries.
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