Chen, Erickson, Harding, Stomberg, and Xia (2023) use the Tax Cuts and Jobs Act of 2017 (hereafter, TCJA) to ask two related questions about firms’ responses to a major shock to their tax reporting environment: (1) what factors affect firms’ abilities to produce accurate initial estimates of the one-time transition tax required by the TCJA and (2) do companies try to manage external perceptions about the amount of taxes they will pay by overstating their initial estimates of the tax owed? The results are broadly consistent with firms reporting more accurate initial transition tax estimates when their information processing and gathering costs are lower and with some firms temporarily attempting to manage perceptions about their taxes by overstating their initial transition tax estimate when they avoid more taxes (especially through tax havens) and when they have received media attention related to their tax practices. Specifically, the authors find that firms...
