The persistence and pricing of earnings, accruals, and cash flows when firms have large book-tax differences

• 成果类型: Article
• 署名作者: Hanlon, M
• 署名单位: University of Michigan System; University of Michigan
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2005.80.1.137
• 发表日期: 2005
• 页码: 137-166
• 关键词: DELISTING BIAS; FULLY REFLECT; stock-prices; management; INFORMATION; income

摘要

I investigate the role of book-tax differences in indicating the persistence of earnings, accruals, and cash flows for one-period-ahead earnings. I also examine whether the level of book-tax differences influences investors' assessments of future earnings persistence. I find that firm-years with large book-tax differences have earnings that are less persistent than firm-years with small book-tax differences. Further, the evidence is consistent with investors interpreting large positive book-tax differences (book income greater than taxable income) as a red flag and reducing their expectation of future earnings persistence for these firm-years. I then investigate potential sources of the lower persistence for firm-years with large book-tax differences. I find that special items contribute in part to the results but that firm-years with large book-tax differences continue to have lower persistence in earnings after controlling for the effect of the special items.