Bradley S. Blaylock, Fabio B. Gaertner, T. Shevlin
{"title":"The association between book-tax conformity and earnings management","authors":"Bradley S. Blaylock, Fabio B. Gaertner, T. Shevlin","doi":"10.2139/ssrn.1983107","DOIUrl":null,"url":null,"abstract":"There is an ongoing 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: 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. We 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.","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"20 1","pages":"141-172"},"PeriodicalIF":4.8000,"publicationDate":"2013-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2139/ssrn.1983107","citationCount":"80","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Accounting Studies","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.2139/ssrn.1983107","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 80
Abstract
There is an ongoing 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: 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. We 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.
期刊介绍:
Review of Accounting Studies provides an outlet for significant academic research in accounting including theoretical, empirical, and experimental work. The journal is committed to the principle that distinctive scholarship is rigorous. While the editors encourage all forms of research, it must contribute to the discipline of accounting. The Review of Accounting Studies is committed to prompt turnaround on the manuscripts it receives. For the majority of manuscripts the journal will make an accept-reject decision on the first round. Authors will be provided the opportunity to revise accepted manuscripts in response to reviewer and editor comments; however, discretion over such manuscripts resides principally with the authors. An editorial revise and resubmit decision is reserved for new submissions which are not acceptable in their current version, but for which the editor sees a clear path of changes which would make the manuscript publishable. Officially cited as: Rev Account Stud