Download or read book Earnings Management Corporate Tax Shelters and Book Tax Alignment written by Dhammika Dharmapala and published by . This book was released on 2009 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews recent evidence analyzing the link between earnings management and corporate tax avoidance and considers the implications for how policymakers should evaluate the financial reporting environment facing firms. A real-world tax shelter is dissected to illustrate how tax shelter products enable managers to manipulate reported earnings. A stylized example is developed that generalizes this view of corporate tax avoidance and empirical evidence consistent with this view is discussed. This view of corporate tax avoidance implies that shareholders and policymakers should question the rationale for distinct financial reports and that greater book-tax alignment may have mutually beneficial effects for investors and tax authorities.
Download or read book The Association Between Book Tax Conformity and Earnings Management written by Bradley S. Blaylock and published by . This book was released on 2014 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is an on-going debate in the literature about the costs and benefits of conforming book and taxable income. Proponents argue that increased book-tax conformity will reduce aggressive financial reporting because managing earnings up increases taxes and will curtail abusive tax shelters because managing taxes down decreases earnings reported to shareholders. We use a panel of 139,536 firm-year observations across 34 countries over the period 1996-2007 to test whether high levels of book-tax conformity are associated with less earnings management and find that higher book-tax conformity is associated with significantly more, not less earnings management. We conclude that one of the primary claimed benefits of increasing book-tax conformity, more truthful financial reporting with less earnings management, is unlikely to be as large as previously thought.
Download or read book Accounting for Income Taxes written by John R. Graham and published by Now Pub. This book was released on 2012-11-09 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for Income Taxes is the most comprehensive review of AFIT research. It is designed both to introduce new scholars to this field and to encourage active researchers to expand frontiers related to accounting for income taxes. Accounting for Income Taxes includes both a primer about the rules governing AFIT (Sections 3-4) and a review of the scholarly studies in the field (Sections 5-8). The primer uses accessible examples and clear language to express essential AFIT rules and institutional features. Section 3 reviews the basic rules and institutional details governing AFIT. Section 4 discusses ways that researchers, policymakers, and other interested parties can use the tax information in financial statements to better approximate information in the tax return. The second half of the monograph reviews the extant scholarly studies by splitting the research literature into four topics: earnings management, the association between book-tax differences and earnings characteristics, the equity market pricing of information in the tax accounts, and book-tax conformity. Section 5 focuses on the use of the tax accounts to manage earnings through the valuation allowance, the income tax contingency, and permanently reinvested foreign earnings. Section 6 discusses the association between book-tax differences and earnings characteristics, namely earnings growth and earnings persistence. Section 7 explores how tax information is reflected in share prices. Section 8 reviews the increased alignment of accounting for book purposes and tax purposes. The remainder of the paper focuses on topics of general interest in the economics and econometric literatures. Section 9 highlights some issues of general importance including a theoretical framework to interpret and guide empirical AFIT studies, the disaggregated components of book-tax differences and research opportunities as the U.S. moves toward International Financial Reporting Standards (IFRS). Section 10 discusses econometric weaknesses that are common in AFIT research and proposes ways to mitigate their deleterious effects.
Download or read book Book tax Conformity for Corporate Income written by Michelle Lee Hanlon and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper discusses the issues surrounding the proposals to conform financial accounting income and taxable income. The two incomes diverged in the late 1990s with financial accounting income becoming increasingly greater than taxable income through the year 2000. While the cause of this divergence is not known for certain, many suspect that it is the result of earnings management for financial accounting and/or the tax sheltering of corporate income. Our paper outlines the potential costs and benefits of one of the proposed "fixes" to the divergence: the conforming of the two incomes into one measure. We review relevant research that sheds light on the issues surrounding conformity both in the U.S. as well as evidence from other countries that have more closely aligned book and taxable incomes. The extant empirical literature reveals that it is unlikely that conforming the incomes will reduce the amount of tax sheltering by corporations and that having only one measure of income will result in a loss of information to the capital markets"--National Bureau of Economic Research web site.
Download or read book Strategic Corporate Tax Planning written by John E. Karayan and published by John Wiley & Sons. This book was released on 2002-10-02 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt: A corporate guide to understanding the basic tax implications ofeveryday business Organized to cover the tax implications of transactions as theyoccur through a company's life cycle, the basic principles of taxmanagement are applied through the use of case studies thatsimulate a variety of real-world marketplace conditions.Value-added and financial reporting effects of tax management arediscussed, as well as country-specific tax rules, and cross-bordertransactions. John E. Karayan, JD, PhD (Glendale, CA), is a professor atCalifornia State Polytechnic University, Pomona. He is also apartner in the law firm of Bond Karayan. Charles W. Swenson, PhD (Pasadena, CA), is a professor atthe University of Southern California, Los Angeles, where heteaches a number of courses in accounting and taxation. Over the years, financial professionals around the world havelooked to the Wiley Finance series and its wide array ofbestselling books for the knowledge, insights, and techniques thatare essential to success in financial markets. As the pace ofchange in financial markets and instruments quickens, Wiley Financecontinues to respond. With critically acclaimed books by leadingthinkers on value investing, risk management, asset allocation, andmany other critical subjects, the Wiley Finance series provides thefinancial community with information they want. Written to provideprofessionals and individuals with the most current thinking fromthe best minds in the industry, it is no wonder that the WileyFinance series is the first and last stop for financialprofessionals looking to increase their financial expertise.
Download or read book Taxation and Earnings Management written by G. Nathan Dong and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence on how statutory corporate tax rate changes affect income-shifting behavior. Our difference-in-differences identification strategy exploits the 112 staggered changes in corporate income tax rates across the 33 U.S. states during the period 1989-2012. We find that accounting earnings are more likely to be managed upward in response to state tax cuts and more significantly among firms with higher prior-year return on assets. Most firms do not manage earnings downward in response to tax increases, probably because significant tax increases usually occur when states are fiscally constrained and downward smoothing of reported earnings can certainly draw scrutiny from cash-strapped state governments. More importantly, firms had higher ROA but experienced lower stock returns prior to tax cuts do use discretionary accruals to increase earnings in the year of the tax cut and reduce earnings in the year of the tax rise, a strategy that improves returns to shareholders. This evidence suggests that firms often trade off the tax benefits of earnings management to maximize firm value for a lower risk of being detected by the regulators and other market participants.
Download or read book Book Tax Conformity and Earnings Management in Response to Tax Rate Cuts written by Dennis Sundvik and published by . This book was released on 2018 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the link between earnings management and jurisdictional differences in book-tax conformity. A dataset of national reforms where the corporate tax rate is lowered is used to estimate the effect of conformity on private firm's earnings management behavior when a specific incentive to manage earnings downward exists. Total and discretionary accruals are used to measure earnings management and a continuous measure is used to assess the level of book-tax conformity. The results suggest that changes in the statutory tax rate affect firms within jurisdictions with high book-tax conformity more than firms in jurisdictions where book and taxable income are less conformed. However, more overall earnings management is attributed to firms in the low conformity jurisdictions. With these findings, a contribution based on private firms and signed earnings management is made to the ongoing debate on the appropriate level of book-tax conformity.
Download or read book Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
Download or read book Tax and Corporate Governance written by Wolfgang Schön and published by Springer Science & Business Media. This book was released on 2008-03-12 with total page 423 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic research shows that well-known principal-agent and capital market problems are strongly influenced by tax considerations. Against this background, this volume is the first to present a fully-fledged overview of the interdependence of tax and corporate governance. Not only the basic political, legal and economic questions but also major topics like income measurement, shareholding structures, corporate social responsibility and tax shelter disclosure are covered.
Download or read book Fundamentals of Corporate Taxation written by and published by . This book was released on 2005 with total page 826 pages. Available in PDF, EPUB and Kindle. Book excerpt: Clear, concise, and engaging, Fundamentals of Corporate Taxation teaches the fundamentals of a highly complex subject with skillfully drafted problems, explanatory text, and a selective mix of original source materials. The coursebook incorporates all relevant changes from recent acts, including the American Jobs Creation Act of 2004 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. Important new highlights include discussions on the impact of reduced tax rates on qualified dividends, new rules limiting the transfer or importation of built-in-losses, and the response by courts and the Internal Revenue Service to corporate tax shelters. The sixth edition also contains new material on corporate reorganizations and S corporations, rulings on Section 351 control requirements and corporate divisions, and more permissive eligibility requirements and other new statutory rules.
Download or read book Bank Tax Conformity for Corporate Income written by Michelle Hanlon and published by . This book was released on 2010 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the issues surrounding the proposals to conform financial accounting income and taxable income. The two incomes diverged in the late 1990s with financial accounting income becoming increasingly greater than taxable income through the year 2000. While the cause of this divergence is not known for certain, many suspect that it is the result of earnings management for financial accounting and/or the tax sheltering of corporate income. Our paper outlines the potential costs and benefits of one of the proposed quot;fixesquot; to the divergence: the conforming of the two incomes into one measure. We review relevant research that sheds light on the issues surrounding conformity both in the U.S. as well as evidence from other countries that have more closely aligned book and taxable incomes. The extant empirical literature reveals that it is unlikely that conforming the incomes will reduce the amount of tax sheltering by corporations and that having only one measure of income will result in a loss of information to the capital markets.
Download or read book Tax induced Earnings Management and Book tax Conformity written by Sebastian Eichfelder and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We quantify the degree of tax-induced earnings management associated with statutory tax rates and examine whether greater book-tax conformity alters this particular type of earnings management. We first validate a new empirical approach for examining tax-induced earnings management using European unconsolidated financial and ownership information over 2005-2013. We provide robust evidence of significant tax-induced earnings management in both domestic and multinational firms. In particular, the results suggest that a 10 percentage point increase in the corporate tax rate relates to an 8.2 percent decrease in pre-tax book income. We then document that firms in countries with greater book-tax conformity engage in additional tax-induced earnings management. This is important given that it contrasts with prior literature, which does not find an effect for book-tax conforming transactions with a change in conformity.
Download or read book The Corporate Profit Base Tax Sheltering Activity and the Changing Nature of Employee Compensation written by Mihir Arvind Desai and published by . This book was released on 2002 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the evolution of the corporate profit base and the relationship between book income and tax income for U.S. corporations over last two decades. The paper demonstrates that this relationship has broken down over the 1990s and has broken down in a manner that is consistent with increased sheltering activity. The paper traces the growing discrepancy between book and tax income associated with differential treatments of depreciation, the reporting of foreign source income, and, in particular, the changing nature of employee compensation. For the largest public companies, proceeds from option exercises equaled 27 percent of operating cash flow from 1996 to 2000 and these deductions appear to be fully utilized thereby creating the largest distinction between book and tax income. While the differential treatment of these items has historically accounted fully for the discrepancy between book and tax income, the paper demonstrates that book and tax income have diverged markedly for reasons not associated with these items during the late 1990s. In 1998, more than half of the difference between tax and book income - approximately $154.4 billion or 33.7 percent of tax income - cannot be accounted for by these factors. This paper proceeds to develop and test a model of costly sheltering and demonstrates that the breakdown in the relationship between tax and book income is consistent with increasing levels of sheltering during the late 1990s. These tests also explore an alternative explanation of these results - coincident increased levels of earnings management - and finds that the nature of the breakdown between book and tax income cannot be fully explained by this alternative explanation
Download or read book Essays on Earnings Management and Tax Avoidance in Corporate Financial Reporting written by Lisa Frey and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Corporate Tax Shelters written by United States. Congress. House. Committee on Ways and Means and published by . This book was released on 2001 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Tax Implications of Earnings Management Activities written by Brad A. Badertscher and published by . This book was released on 2014 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the tax implications of pretax earnings management. Prior research has examined pretax earnings management activities that have current income tax consequences (book-tax 'conforming earnings management') and earnings management activities that do not have current income tax consequences (book-tax 'nonconforming earnings management'). Our study investigates the prevalence of, and firm-specific characteristics that impact the choice between, these earnings management strategies. This investigation leads to a better understanding of the book-tax trade-offs managers face when managing earnings upward.We utilize a sample of firms that restated their earnings downward due to accounting irregularities and thus can be presumed to have managed their earnings upward. We find that nonconforming earnings management is more prevalent than conforming earnings management. Using the Heckman (1979) two-step estimation approach to control for sample selection bias, we predict and find that firms trade off the net present value of tax benefits against the net expected detection costs associated with nonconforming earnings management. In particular, the presence of NOL carryforwards, high free cash flow, a Big 4/5/6 auditor, or fraud mitigate the general reliance on nonconforming earnings management strategies.
Download or read book Taxes and Business Strategy written by Myron S. Scholes and published by . This book was released on 2015-01-03 with total page 528 pages. Available in PDF, EPUB and Kindle. Book excerpt: For MBA students and graduates embarking on careers in investment banking, corporate finance, strategy consulting, money management, or venture capital Through integration with traditional MBA topics, Taxes and Business Strategy, Fifth Edition provides a framework for understanding how taxes affect decision-making, asset prices, equilibrium returns, and the financial and operational structure of firms. Teaching and Learning Experience This program presents a better teaching and learning experience-for you and your students: *Use a text from an active author team: All 5 authors actively teach the tax and business strategy course and provide students with relevant examples from both classroom and real-world consulting experience. *Teach students the practical uses for business strategy: Students learn important concepts that can be applied to their own lives. *Reinforce learning by using in-depth analysis: Analysis and explanatory material help students understand, think about, and retain information.
