Mispricing of Book-Tax Differences and the Trading Behavior of Short Sellers and Insiders

• 成果类型: Article
• 署名作者: Chi, Sabrina S.; Pincus, Morton; Teoh, Siew Hong
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville; University of California System; University of California Irvine
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50644
• 发表日期: 2014
• 页码: 511-543
• 关键词: earnings management; Fundamental analysis; FUTURE EARNINGS; SHORT SALES; INFORMATION; constraints; investors; income; performance; strategies

摘要

We find evidence that investors misprice information contained in book-tax differences (BTDs), measured as the ratio of taxable income to book income, TI/BI. Low TI/BI predicts worse earnings growth and abnormal stock returns than high TI/BI. We find that short sellers and insiders arbitrage BTD mispricing, but the arbitrage is imperfect because of constraints on short selling and insider trading. Under SFAS No. 109 the predictability is stronger for TEMP/BI, the temporary component of TI/BI, which reflects greater managerial discretion. The results are incremental to a large set of known accruals-based anomaly predictors. We suggest that a sunshine policy of disclosing a reconciliation of book and taxable incomes can reduce mispricing of BTDs and improve capital market resource allocation.