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SEC comment letters related to permanently reinvested earnings

Author

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  • Eiler, Lisa
  • Kutcher, Lisa

Abstract

In this paper, we examine how permanently reinvested earnings (PRE) and disclosure transparency surrounding PRE influences external monitoring from the Securities and Exchange Commission (SEC). Our research is motivated by increased congressional and SEC scrutiny into companies with substantial PRE via their foreign operations. We hypothesize that firms are more likely to receive a PRE-related comment letter if they have large amounts of PRE, a large estimated hypothetical tax on repatriation, increases in PRE, and have less transparent disclosures related to the hypothetical tax on PRE. We find that the estimated hypothetical tax on repatriation and the transparency of PRE disclosures are determinants of receiving a PRE-related comment letter. Further analysis shows that cash-constrained firms with a large estimated hypothetical tax on repatriation are more likely to receive a PRE-related comment letter. Our research contributes to a growing body of research into the external monitoring role of the SEC in the form of comment letters.

Suggested Citation

  • Eiler, Lisa & Kutcher, Lisa, 2016. "SEC comment letters related to permanently reinvested earnings," Advances in accounting, Elsevier, vol. 34(C), pages 110-116.
    • Handle: RePEc:eee:advacc:v:34:y:2016:i:c:p:110-116
    DOI: 10.1016/j.adiac.2016.07.009
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    References listed on IDEAS

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    1. Julie H. Collins & John R. M. Hand & Douglas A. Shackelford, 2000. "Valuing Deferral: The Effect of Permanently Reinvested Foreign Earnings on Stock Prices," NBER Chapters, in: International Taxation and Multinational Activity, pages 143-172, National Bureau of Economic Research, Inc.
    2. Bryant–Kutcher, Lisa & Eiler, Lisa & Guenther, David A., 2008. "Taxes and Financial Assets: Valuing Permanently Reinvested Foreign Earnings," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(4), pages 699-720, December.
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    Cited by:

    1. Anna Görlitz & Michael Dobler, 2023. "Financial accounting for deferred taxes: a systematic review of empirical evidence," Management Review Quarterly, Springer, vol. 73(1), pages 113-165, February.

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    More about this item

    Keywords

    Deferred tax liability; Permanently reinvested earnings; Comment letters; Securities and Exchange Commission;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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