Journal article
Tax Avoidance, Large Positive Temporary Book-Tax Differences, and Earnings Persistence
The Accounting review, Vol.87(1), pp.91-120
01/01/2012
DOI: 10.2308/accr-10158
Abstract
We investigate why temporary book-tax differences appear to serve as a useful signal of earnings persistence (Hanlon 2005). We first test and show that temporary book-tax differences provide incremental information over the magnitude of accruals for the persistence of earnings and accruals. We then opine that there are multiple potential sources of large positive book-tax differences. We predict and find that firms with large positive book-tax differences likely arising from upward earnings management (tax avoidance) exhibit lower (higher) earnings and accruals persistence than do other firms with large positive book-tax differences. Finally, we find significant variation in current-period earnings and accruals response coefficients and insignificant hedge returns in period t+1, consistent with investors being able to look through to the source of large positive book-tax differences (earnings management and tax avoidance), allowing them to correctly price the persistence of accruals for these subsamples.
Details
- Title: Subtitle
- Tax Avoidance, Large Positive Temporary Book-Tax Differences, and Earnings Persistence
- Creators
- Bradley Blaylock - Oklahoma State UniversityTerry Shevlin - University of WashingtonRyan J. Wilson - University of Iowa
- Resource Type
- Journal article
- Publication Details
- The Accounting review, Vol.87(1), pp.91-120
- Publisher
- Amer Accounting Assoc
- DOI
- 10.2308/accr-10158
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Number of pages
- 30
- Language
- English
- Date published
- 01/01/2012
- Academic Unit
- Accounting
- Record Identifier
- 9984380425702771
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