John D. Gallemore studies financial institutions, financial reporting, corporate taxation, regulation and regulators, and internal information quality. His papers have been accepted for publication in the Journal of Accounting & Economics and Contemporary Accounting Research. He has presented at several accounting and banking conferences, including the UNC Tax Symposium and the FDIC Bank Research Conference.
Prior to his return to academia, Gallemore worked as a consultant for Navigant Consulting. During his time there, he worked on projects involving banks that failed during the savings and loan crisis of the 1980s. These projects provided Gallemore an appreciation for the interactions between accounting information, bank choices, and regulation, which has influenced his research and teaching.
Gallemore earned his Ph.D. in accounting from the University of North Carolina at Chapel Hill. During his time in the Ph.D. program, Gallemore was awarded one of the ten 2012 Deloitte Foundation Doctoral Fellowship Awards, and was the American Accounting Association's representative at the 2013 European Accounting Association Doctoral Colloquium in Paris, France. Additionally, he holds a Master's in Business Administration (where he finished first in his class), a B.S. in Business Administration, and a B.A. in Political Science, all from the University of North Carolina at Chapel Hill.
Outside of research and teaching, Gallemore enjoys playing and watching sports, reading, traveling, and spending time with his wife and daughters.
2016 - 2017 Course Schedule
||Cost Analysis and Internal Controls
REVISION: The Effect of Corporate Taxation on Bank Transparency: Evidence from Loan Loss Provisions
We examine how the corporate tax system, through the tax treatment of loan losses, affects bank financial reporting choices. Our identification strategy exploits cross-country and intertemporal variation in corporate tax rates and the tax deductibility of loan loss provisions. Using an international sample of banks, we find that the loan loss provision is increasing in the corporate tax rate for countries that permit the tax deduction of general provisions. Furthermore, we show that this effect is driven by the corporate tax system encouraging timelier loan loss recognition: the extent to which future and current loan portfolio quality deteriorations are incorporated in the loan loss provision is increasing in the tax rate when general provisions are tax deductible. We also find evidence that the corporate tax system encourages provisioning by banks with capital ratios close to the regulatory requirement and in countries with relatively weak banking supervisors. Finally, we find that ...
REVISION: Banks as Tax Planning Intermediaries
We provide the first large-sample evidence of banks playing an important role in facilitating tax planning by client firms. Banks could be associated with client tax avoidance through two separate mechanisms. First, banks may act as tax planning intermediaries by developing and implementing tax strategies for corporate clients or by spreading tax strategies across clients. Second, banks may select borrowers in part based on their tax avoidance. Capturing bank-client relationships using lending contracts, we find that a borrower’s own tax avoidance is strongly associated with the average tax avoidance of its bank’s other borrowers. Further tests are consistent with this result being driven in part by banks acting as tax planning intermediaries. Finally, we find that borrowers experience meaningful increases in tax avoidance when they begin a new relationship with a bank whose existing borrowers are substantial tax avoiders. Overall, our results suggest that banks, in addition to being ...
REVISION: The Importance of the Internal Information Environment for Tax Avoidance
We show that firms’ ability to avoid taxes is affected by the quality of their internal information environment, with lower effective tax rates (ETRs) for firms that have high internal information quality. The effect of internal information quality on tax avoidance is stronger for firms in which information is likely to play a more important role. For example, firms with greater coordination needs because of a dispersed geographical presence benefit more from high internal information quality. Similarly, firms operating in a more uncertain environment benefit more from the quality of their internal information in helping them to reduce ETRs. In addition, we provide evidence that high internal information quality allows firms to achieve lower ETRs without increasing the risk of their tax strategies (as measured by ETR volatility). Overall, our study contributes to the literature on tax avoidance by providing evidence that the internal information environment of the firm is important ...
REVISION: Bank Executive Overconfidence and Delayed Expected Loss Recognition
While prior work shows that delayed expected loan loss recognition is related to lending propensity (Beatty and Liao, 2011), bank risk (Bushman and Williams, 2011), and bank risk taking (Bushman and Williams, 2012), we provide evidence that executive overconfidence is a potential driver of delayed expected loan loss recognition. We find that overconfident bank CEOs and CFOs recognize lower loan loss provisions and incorporate current and future deterioration in nonperforming loans in their loan loss provisions less than other bank CEOs and CFOs. Our evidence of delayed expected loss recognition is driven primarily by CFOs, consistent with CFOs being closer to the financial reporting function than CEOs. The study is important because it demonstrates that manager characteristics can have meaningful economic consequences for financial institutions through the reporting of asset risk.
REVISION: The Reputational Costs of Tax Avoidance
We investigate whether firms and their top executives bear reputational costs from engaging in aggressive tax avoidance activities. Prior literature has posited that reputational costs partially explain why so many firms apparently forgo the benefits of tax avoidance, the so-called “under-sheltering puzzle.” We employ a database of 118 firms that were subject to public scrutiny for having engaged in tax shelters, representing the largest sample of publicly identified corporate tax shelters analyzed to date. We examine the reputational costs that prior research has shown that firms and managers face in cases of alleged misconduct: increased CEO and CFO turnover, auditor turnover, lost sales, increased advertising costs, and decreased media reputation. Across a battery of tests, we find little evidence that firms or their top executives bear significant reputational costs as a result of being accused of engaging in tax shelter activities. Moreover, we find no decrease in firms’ tax ...