This study investigates whether industrial diversification generally provides a tax advantage and how the convexity of the tax system contributes to this benefit. The main findings show multi-industry operations do lower a firm’s taxes and income volatility relative to single industry operations on average, but the benefit is not universal. Namely, there is no significant tax advantage when multi-industry firms have high cross-industry cash flow correlations or when limitations are placed on the convexity mechanism, such as when firms have recent diversifying acquisitions or a high degree of cross-jurisdiction activity. To shed new light on the mechanism through which U.S. firms realize this benefit, I exploit two temporary policies expected to reduce tax convexity via extensions of loss carryback periods. I find these policies also mitigate the tax advantage. Taken together, the results underscore how context matters in determining whether a firm will realize a tax advantage from multi-industry operations.

中文翻译：

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产业多元化对企业税收的影响

本研究调查了产业多元化是否普遍提供税收优势，以及税收制度的凸性如何促成这种优势。主要研究结果表明，与单一行业经营相比，多行业经营确实降低了公司的税收和收入波动性，但收益并不普遍。也就是说，当多行业公司具有高跨行业现金流相关性或对凸性机制施加限制时，例如当公司最近进行多元化收购或高度跨辖区活动时，没有显着的税收优势。为了阐明美国公司实现这一好处的机制，我利用了两项临时政策，这些政策有望通过延长亏损结转期来减少税收凸性。我发现这些政策也减轻了税收优势。总而言之，结果强调了背景在确定公司是否会从多行业运营中实现税收优势方面的重要性。