The Effects of Increased Book-Tax Difference Tax Return Disclosures on Firm Valuation and Behavior

Donohoe, Michael P.; McGill, Gary A.

doi:10.2308/atax-10056

Cited by 62 publications

(49 citation statements)

References 55 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Assessing the BTD is important because BTD can be used as an attribute of financial reporting quality and can contain incremental informations for investors and users of companies' financial reports. Recent research focus on either BTD are associated with earnings management (Joos et al, 2000;Mills & Newberry, 2001;Donohoe & McGill, 2010;Comprix et al, 2011) or tax planning (Wilson, 2009). Some studies attribute the BTD to both EM and TM (Tang & Firth, 2011;Chen et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

Dridi¹,

Boubaker²

2015

IJBM

View full text Add to dashboard Cite

In this study, we examine empirically whether the gap between the pre-tax income and the taxable income predicts simultaneously earnings management and tax management. Prior researches have begun to estimate several indictors of earnings quality. We extends this works by investigating whether the book-tax differences (BTD) provides information about managerial discretion. BTD can be used as an attribute of information quality and can contain incremental information for investors and users of financial reports of companies We compose a sample of 21 listed Tunisian firms over the 2003-2012 periods, we apply a statistical methodology implementing a linear panel regression. We develop a model in which we estimate abnormal BTD. All earnings and tax management activities are captures by our abnormal BTD indicator (ABTD). From this regression we are going to test the effect of the variables of the earnings and tax management on the ABTD variable. We find, as expected, a significant association between BTD and manager discretion proxies. Our results indicate that BTD contains a predictive power over the earnings and tax management. We find that Tunisian companies are concerned about tax reducing rather than improved information quality and increasing the financial result.

show abstract

Section: Introductionmentioning

confidence: 99%

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

Dridi¹,

Boubaker²

2015

IJBM

View full text Add to dashboard Cite

show abstract

“…The purpose of each system leads to a gap between the pre-tax income and the taxable income (book-tax differences). This difference is used as a proxy for earnings management (Joos et al, 2000;Mills & Newberry, 2001;Donohoe & McGill, 2010;Comprix et al, 2011, Hanlon, 2005Blaylock et al, 2012) or tax planning (Wilson, 2009). Some studies attribute the book-tax differences to both earnings and tax management (Tang & Firth, 2011;Tang & Firth, 2012;Chen et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

An Assessment of the Linkage between Financial Reporting and Taxation in Tunisia

Dridi¹,

Boubaker²

2015

IBR

View full text Add to dashboard Cite

The relationship between tax and financial reporting has deferred widely over time. The connection between accounting and taxation can provide negative effects; such as earnings management for fiscal purposes and value relevance distortion. This leads to an optimal and efficient looking on the nature of the relation that should bring them together. Few studies have focused on this relationship in some countries, but no research has been applied in the context of Tunisia using an empirical model. In this paper, we analyze within this framework the Tunisian case. We specified a longitudinal dimension of tax and financial reporting association through the separation of two periods of evolution. We collected information about the different accounting and fiscal treatments of seventeen substantial accounting topics from 1968 to 2013, and we assessed them using five cases of connection or disconnection. The results show that even in the case of the lack of accounting standards, there is a total disconnection between accounting and taxation in Tunisia. We also found that the relationship between accounting and taxation in this country was a typical of continental European countries before accounting normalization. After the Tunisian accounting system implementation, the nature of this relationship has changed to the Anglo-Saxon system.

show abstract

“…For example, Frischmann et al (2008) examine the market reaction to various dates regarding the development and implementation of FIN 48 and find no significant initial market reaction. 4 Similarly, Donohoe and McGill (2011) document a significant negative market reaction to the development of Schedule M-3. Donohoe and McGill (2011, 37) further note that ''as regulators acquire new and/or update old sources of data in an effort to reduce the tax gap, it is important that we recognize the potential valuation effects of such enforcement efforts.''…”

mentioning

confidence: 99%

“…Our study not only examines the initial announcement, but also the release of the draft form and instructions for Schedule UTP, and the final form and instructions for Schedule UTP. As noted in Donohoe and McGill (2011), examining the market reaction to news released on multiple event dates is important before making inferences about the response of market participants. These dates are important in assessing the response of market participants because the original draft of Schedule UTP reaffirmed the controversial provisions of Schedule UTP despite many concerns raised by commenters.…”

mentioning

confidence: 99%

Schedule UTP: Stock Price Reaction and Economic Consequences

2012

View full text Add to dashboard Cite

In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP could increase a firm's tax burden by providing a roadmap for the IRS to identify firms' tax-planning strategies. We find that stock returns around the development of Schedule UTP are negative, consistent with investors' concern that Schedule UTP would impose costs on firms. However, we document a significant positive stock price reaction to the release of the final draft of Schedule UTP in which the IRS relaxed many of the controversial provisions of Schedule UTP. Additionally, we find this positive reaction is incrementally larger for more taxaggressive firms. Finally, we find a significant decrease in reported unrecognized tax benefits (UTBs) and additions to UTBs after the adoption of Schedule UTP in 2010.

show abstract

The Effects of Increased Book-Tax Difference Tax Return Disclosures on Firm Valuation and Behavior

Cited by 62 publications

References 55 publications

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

An Assessment of the Linkage between Financial Reporting and Taxation in Tunisia

Schedule UTP: Stock Price Reaction and Economic Consequences

Contact Info

Product

Resources

About