Forecasting Taxes: New Evidence from Analysts

• 成果类型: Article
• 署名作者: Bratten, Brian; Gleason, Cristi A.; Larocque, Stephannie A.; Mills, Lillian F.
• 署名单位: University of Kentucky; University of Iowa; University of Notre Dame; University of Texas System; University of Texas Austin
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51557
• 发表日期: 2017
• 页码: 1-29
• 关键词: MANAGEMENT EARNINGS FORECASTS; cash flow forecasts; information-content; CORPORATE DISCLOSURE; security analyst; FUTURE EARNINGS; taxable income; stock returns; accuracy; BEHAVIOR

摘要

We provide new evidence about how analysts incorporate and improve on management ETR forecasts. Quarterly ETR reporting under the integral method provides mandatory point-estimate forecasts by management, but firms must record certain discrete'' tax items fully in the quarter in which they occur, polluting these forecasts. We investigate management ETR accuracy, analysts' decisions to mimic management's estimate, analysts' accuracy relative to each other or to management, and dispersion. Our comprehensive analysis reveals that analysts deviate from management more and are more accurate relative to management as complexity increases, with real effects on EPS accuracy and dispersion. In contrast to prior research that analysts ignore or are confused by taxes, we provide evidence that analysts pay attention to taxes and improve on management estimates. Based on our evidence that management's quarterly ETRs have less predictive value in the presence of discrete items, we suggest standard-setters reexamine the discrete item exception to require more disclosure.