The association between financial accounting measures and real economic activity: a multinational study

Guenther, David A.; Young, Danqing

doi:10.1016/s0165-4101(00)00013-6

Cited by 162 publications

(117 citation statements)

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“…Differences between legal systems, demands for accounting information, differences in legal protection for external shareholders, and differences in degrees of financial and tax compliance (FTC) can have an impact on managers' accounting choices (Guenther & Young, 2000), and, consequently, the usefulness of the accounting numbers released by companies. Thus, different 2014), by providing evidence about which types of BTDs affect future results forecasts in some Latin American countries.…”

Section: Introduction Types Of Btds Can Have Different Usefulness Formentioning

confidence: 99%

The Relevance of the Informational Content of Book-Tax Differences for Predicting Future Income: Evidence from Latin American Countries

Marques

Costa

Rogers

2016

Rev. contab. finanç.

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This study aims to investigate whether the different types of book-tax differences are useful for predicting the future income of publicly traded companies in five Latin American countries. This is possible since these differences convey information about transitory components of income, which can be used by investors for predicting future income. However, little is known about the relationship between tax variables and companies' future results. The sample analyzed here is composed of 580 publicly traded companies from five Latin American countries (Argentina, Brazil, Chile, Mexico, and Peru) with information available in the Economatica® database covering 2002 to 2013. In terms of methodology, regressions are employed in order to find a connection between the different types (total, permanent, temporary, and the negative and positive variations) of book-tax differences and companies' current and future earnings per share, as well as some control variables suggested by previous literature. The model's coefficients were estimated through panel data techniques: fixed effects. The results obtained suggest that the information gathered in the different types of book-tax differences (total, permanent, temporary, positive and negative variations) is relevant in predicting future income. Total, permanent and temporary differences contribute to the uncertainty in future income prediction, given that results are more transitory and less persistent in years with higher book-tax differences. Positive and negative variations, on the other hand, attribute higher income in coming years to greater variations in book-tax differences, representing increased timeliness of results and a reduction in off balance sheet funding for the publicly traded companies from these countries.

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Section: Introduction Types Of Btds Can Have Different Usefulness Formentioning

confidence: 99%

The Relevance of the Informational Content of Book-Tax Differences for Predicting Future Income: Evidence from Latin American Countries

Marques

Costa

Rogers

2016

Rev. contab. finanç.

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“…Further, see the financial accounting literature on comparison of accounting across countries more generally (e.g., Ball et al, 2000) and a discussion of the international studies on book-tax conformity (Hanlon et al, 2008). 35 See Guenther et al (1997), Ali and Hwang (2000), Ball et al (2000), Ball et al (2003), Guenther and Young (2000), , , McClelland and Mills (2007), , , Atwood et al (2010), and Hanlon and Maydew (2009). (and process to determine the rules to compute the number) could be closer to the current taxable income than current book income. 36 If that were to occur, much of the philosophy of the FASB and the SEC (i.e., having an independent standard-setting board, full disclosure rules, etc.)…”

mentioning

confidence: 99%

A review of tax research

Hanlon¹,

Heitzman²

2010

Journal of Accounting and Economics

2,127

646

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Abstract:In this paper, we present a review of tax research. We survey four main areas of the literature: 1) the informational role of income tax expense reported for financial accounting, 2) corporate tax avoidance, 3) corporate decision-making including investment, capital structure, and organizational form, and 4) taxes and asset pricing. We summarize the research areas and questions examined to date and what we have learned or not learned from the work completed thus far. In addition, we provide our opinion as to the interesting and important issues for future research. ______________________This paper was prepared for the 2009 Journal of Accounting and Economics Conference. We appreciate comments from Scott Dyreng, Mihir Desai (discussant), S.P. Kothari (editor), John Long, Ed Maydew, Lillian Mills, Tom Omer, Sonja Rego, Doug Shackelford, Terry Shevlin, Joel Slemrod, Cliff Smith, David Weber, Ryan Wilson, Jerry Zimmerman, George Zodrow, and conference participants at the JAE Conference as well as at the 2009 University of North Carolina Tax Symposium and the discussant there, Bill Gentry. All errors and omissions are our own. * Corresponding author: 100 Main Street, Cambridge, MA. email: mhanlon@mit.edu. 1 A Review of Tax Research IntroductionIn this paper, we review tax research in accounting as well as tax research in economics and finance to the extent that it is related to or is affected by research in accounting. Shackelford and Shevlin (2001) provide a careful and thorough review of empirical tax research in accounting in the prior Journal of Accounting and Economics review volume. Shackelford and Shevlin limit their review to research published in accounting outlets and describe the development of the relatively young archival, microeconomic-based income tax literature that arose from the Scholes andWolfson framework. In his discussion of the review, Maydew (2001) emphasizes the need for tax researchers in accounting to think more broadly and to incorporate more theory and evidence from economics and finance. We agree. Tax research has a long history in many disciplines; this fact cannot be ignored. Our goal in this paper is to integrate the theoretical and empirical tax research from accounting, economics, and finance, to summarize what is known and unknown, and to offer suggestions for future research.The multidisciplinary nature of tax research is what makes tax research exciting (yes, exciting), yet difficult. Tax research can be difficult not only because one has to follow tax studies in accounting, finance, economics, and law (through academic institutions, governmental agencies, and policy think tanks), but also because different disciplines often use different languages and have different perspectives. 1 For example, economists generally focus on tax compliance, tax incidence (such as who bears the corporate tax), investment and economic growth effects (such as how taxes 1 Slemrod (1992a) characterizes these differences as economists studying what corporations actually do and accountants stud...

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“…Ali and Hwang (2000) compare earnings informativeness across several country-specific factors including the level of book-tax conformity and find that earnings are less informative in countries where book-tax conformity is higher. Guenther and Young (2000) find that earnings are more closely related to economic activity in the U.S. and the UK than in Germany, France, and Japan. They argue, among other things, that the U.S. and UK have powerful accounting standard setting bodies that are distinct from the tax authority.…”

Section: Book-tax Conformity Evidencementioning

confidence: 75%

Book-tax conformity and capital structure

2017

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We examine the effect of increased book-tax conformity on corporate capital structure. Prior studies document a decrease in the informativeness of accounting earnings for equity markets resulting from higher book-tax conformity. We argue that the decrease in earnings informativeness impacts equity holders more than debt holders because of the differences in payoff structures between debt and equity investments such that increases in book-tax conformity lead to increases in firms' reliance on debt capital. We exploit a natural experiment in the U.S. and find that firms facing an increase in required book-tax conformity increase leverage relative to other firms. We also provide evidence of an increase in the cost of equity (but not of debt) capital for firms facing an increase in required book-tax conformity relative to control firms and that these increases in cost of equity capital are positively associated with an increase in leverage. Our findings are consistent with firms substituting away from equity and towards more debt in the presence of higher book-tax conformity.

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The association between financial accounting measures and real economic activity: a multinational study

Cited by 162 publications

References 7 publications

The Relevance of the Informational Content of Book-Tax Differences for Predicting Future Income: Evidence from Latin American Countries

The Relevance of the Informational Content of Book-Tax Differences for Predicting Future Income: Evidence from Latin American Countries

A review of tax research

Book-tax conformity and capital structure

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