Guenther, DavidHuang, Jingjing2014-09-292014-09-292014-09-29https://hdl.handle.net/1794/18326U.S. multinational corporations are well known for shifting income to low tax foreign subsidiaries to avoid U.S. income tax. Yet little is known about how multinational corporations opportunistically use low tax foreign subsidiaries for financial reporting purpose. Understanding this question has implications for U.S. accounting regulators to set enforcement targets. Using worldwide consolidated financial statements, I examine the role of taxes for multinational corporations to manage earnings in foreign subsidiaries. I find that by managing earnings in low tax foreign countries, multinational corporations can reduce the effective tax rate on pretax accrual earnings by an average of 4.3%. To examine the implication of opportunistic foreign earnings management on investors' equity valuation, I find evidence that investors do not seem to overvalue foreign managed earnings compared to domestic managed earnings, though foreign earnings are on average valued higher than domestic earnings.en-USAll Rights Reserved.Earnings managementEarnings valuationMultinational corporationsTaxElectronic Thesis or Dissertation