Working paper
Evidence of Differing Market Responses to Meeting or Beating Targets Through Tax Expense Management
SSRN
04/02/2004
DOI: 10.2139/ssrn.521962
Abstract
Does using earnings management to meet or beat analysts' forecasts decrease the market reward to achieving this target? We use changes in effective tax rates from the third to the fourth quarter to estimate managed earnings, following and extending Dhaliwal, Gleason and Mills (2004). We demonstrate that the market discounts the reward to meeting or beating forecasts by an economically significant amount when the company achieves the target through earnings management, using a decrease in tax expense. Our findings are consistent with firms using earnings management to avoid the market punishment of missing the forecast, but failing to capture the full market reward for meeting the target without management. Our results are robust to including an estimate of abnormal accruals and suggest that identifying firms that manage tax expense contributes incrementally in understanding the market response to meeting or beating earnings
Details
- Title: Subtitle
- Evidence of Differing Market Responses to Meeting or Beating Targets Through Tax Expense Management
- Creators
- Cristi A GleasonLillian F. Mills - The University of Texas at Austin
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.521962
- Number of pages
- 48 pages
- Language
- English
- Date posted
- 04/02/2004
- Academic Unit
- Accounting
- Record Identifier
- 9984380595002771
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