Macroeconomic effects of corporate tax policy

Prior studies on the relation between corporate taxes and future macroeconomic growth present contradictory evidence. We argue this mixed evidence is at least partly due to the use of statutory corporate tax rates which ignore the complexity of tax exemptions, tax deductions, tax enforcement and firms’ tax planning. We propose an alternative tax rate measure that aggregates cash effective tax rates of listed firms, which reflect not only statutory tax rates, but also other features of the tax code, enforcement, and firm's tax planning. We find a strong robust negative relation between country-level effective tax rates and future macroeconomic growth

Bisphenol A-glycidyl methacrylate induces a broad spectrum of DNA damage in human lymphocytes

Bisphenol A-glycidyl methacrylate (BisGMA) is monomer of dental filling composites, which can be released from these materials and cause adverse biologic effects in human cells. In the present work, we investigated genotoxic effect of BisGMA on human lymphocytes and human acute lymphoblastic leukemia cell line (CCRF-CEM) cells. Our results indicate that BisGMA is genotoxic for human lymphocytes. The compound induced DNA damage evaluated by the alkaline, neutral, and pH 12.1 version of the comet assay. This damage included oxidative modifications of the DNA bases, as checked by DNA repair enzymes EndoIII and Fpg, alkali-labile sites and DNA double-strand breaks. BisGMA induced DNA-strand breaks in the isolated plasmid. Lymphocytes incubated with BisGMA at 1 mM were able to remove about 50% of DNA damage during 120-min repair incubation. The monomer at 1 mM evoked a delay of the cell cycle in the S phase in CCRF-CEM cells. The experiment with spin trap—DMPO demonstrated that BisGMA induced reactive oxygen species, which were able to damage DNA. BisGMA is able to induce a broad spectrum of DNA damage including severe DNA double-strand breaks, which can be responsible for a delay of the cell cycle in the S phase

Targeting pathogen metabolism without collateral damage to the host

The development of drugs that can inactivate disease-causing cells (e.g. cancer cells or parasites) without causing collateral damage to healthy or to host cells is complicated by the fact that many proteins are very similar between organisms. Nevertheless, due to subtle, quantitative differences between the biochemical reaction networks of target cell and host, a drug can limit the flux of the same essential process in one organism more than in another. We identified precise criteria for this â €network-based' drug selectivity, which can serve as an alternative or additive to structural differences. We combined computational and experimental approaches to compare energy metabolism in the causative agent of sleeping sickness, Trypanosoma brucei, with that of human erythrocytes, and identified glucose transport and glyceraldehyde-3-phosphate dehydrogenase as the most selective antiparasitic targets. Computational predictions were validated experimentally in a novel parasite-erythrocytes co-culture system. Glucose-transport inhibitors killed trypanosomes without killing erythrocytes, neurons or liver cells

Why Does Aggregate Earnings Growth Reflect Information about Future Inflation?

We propose two explanations for the previously documented relation between aggregate earnings growth and future inflation: one based on firms changing their investment in response to earnings growth and the other based on consumers varying their consumption in response to wealth effects of profitability growth. As the supply of goods and services is relatively inelastic in the short run, our arguments imply that changes to near-term demand for investment (consumption) will affect the prices of investment (consumption) goods and services. Consistent with the investment-based argument, we find that profitability changes predict investment and Producer Price Index (PPI) shifts in subsequent quarters. Our analyses also reveal that aggregate earnings growth predicts future investment and PPI forecast errors. We find, at best, weak evidence for the consumption-based link between aggregate earnings growth and future inflation

Corporate tax avoidance and debt costs

We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms’ private information and greater ability to monitor borrowers

Corporate diversification and the cost of debt: The role of segment disclosures

Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect that decreases the firm's default risk. In this paper, we endogenously estimate a firm's segment disclosure quality and investigate whether the quality of segment disclosures significantly affects bond investors' assessment of the co-insurance effect of diversification. We document that bonds issued by industrially diversified firms with high-quality segment disclosures have significantly lower yields than bonds issued by diversified firms with low-quality segment disclosures. We also find that the negative relation between industrial diversification and bond yields becomes stronger when firms improve segment disclosures as a result of FAS 131. Finally, we show that high-quality segment disclosures are associated with lower syndicated loan spreads for a subsample of loans issued by large bank syndicates, which are more likely to rely on publicly reported segment information

Discretionary accruals quality, cost of capital, and diversification

This study examines the discretionary accruals quality of single- and multiple-segment firms. The authors hypothesize and find that the discretionary accruals quality is lower for multiple-segment firms than single-segment firms, and for the same level of discretionary accruals quality, the cost of capital is higher for multiple-segment firms than single-segment firms. These findings suggest that more severe agency problems in multiple-segment firms compared with single-segment firms may lead to poor discretionary accruals quality and agency risk is priced-in as a higher cost of capital

Determinants and trading performance of equity deferrals

This study investigates the determinants and trading performance of outside directors’ equity deferrals, which represent the choice to convert part or all of their annual cash compensation into deferred company stock. Using a large sample of S&P 1500 firms that allowed directors to defer their cash fees into equity between 1999 and 2009, we find significant associations between equity deferral choices and specific features of the director compensation plans, proxies for directors’ outside wealth diversification, and future firm stock market performance. Trading performance analyses indicate that outside directors earn substantial abnormal returns from their deferrals, with a significant proportion of the deferral transactions occurring during blackout periods. These results are consistent with companies structuring director equity deferral plans to circumvent U.S. Securities and Exchange Commission Rule 10b-5’s trading restrictions