An unintended consequence of book-tax conformity: A loss of earnings informativeness

• 成果类型: Article
• 署名作者: Hanlon, Michelle; Maydew, Edward L.; Shevlin, Terry
• 署名单位: University of Michigan System; University of Michigan; University of North Carolina; University of North Carolina Chapel Hill; University of Washington; University of Washington Seattle
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2008.09.003
• 发表日期: 2008
• 关键词: accruals; QUALITY; income

摘要

Increasing the conformity between accounting earnings and taxable income has been proposed to improve financial reporting and curtail aggressive tax planning. We find, however, that increasing conformity results in earnings that are less informative. Our inquiry exploits a unique sample of firms forced to change from the cash method to the accrual method for tax purposes, thereby increasing their book-tax conformity. We find that these firms experienced a decrease in earnings informativeness compared to control firms unaffected by the change. To our knowledge, this is the first evidence of tax law changes affecting the informativeness of accounting earnings. (C) 2008 Elsevier B.V. All rights reserved.