Erik Devos

1 INTRODUCTION It is well established that US corporations face substantial litigation risk, and the literature has shown that corporate litigation events negatively influence firm profitability and value through a variety of channels, such as reductions in capital expenditures and increases in firm-specific risk (Arena & Julio, 2015; Bhagat et al., 1998; Karpoff & Lott, 1993; Malm et al., 2023; McTier & Wald, 2011; Murphy et al., 2009; Unsal & Rayfield, 2019a, 2019b; Unsal, 2019; Yuan &...

Abstract This study examines the determinants of firms’ requests for Private Letter Rulings (PLRs) from the US Internal Revenue Service (IRS) and their impact on firms’ cash holdings. Our results show that PLR requests tend to be made by firms with more active tax planning, more acquisitions, higher analyst following, higher leverage, and less in-house tax expertise. We also show that firms with IRS audit red flags are less likely to request a PLR.

Abstract This paper examines the effect of labor unemployment risk on firm risk. Using unemployment insurance benefits as a proxy for unemployment risk, we find an economically significant positive relation between unemployment risk and firm risk. This positive relation is more pronounced for firms that are more labor-intensive, have a higher layoff propensity and are more financially constrained.