We investigate the joint hypothesis that a) tax expense contains information about core profitability that is incremental to reported earnings and b) that information is reflected in stock prices with a delay. We find that seasonally-differenced quarterly tax expense, our proxy for tax expense...

We document a counter-intuitive finding regarding analyst forecasts of quarterly earnings per share (EPS): magnitudes of deviations from benchmarks - individual forecasts versus consensus (dispersion) and consensus versus actual (forecast error) - do not vary with scale. Seasonally-differenced...

Both intuition and evidence suggest that tax expense reflects value lost to taxes paid. Inconsistent with this traditional valuation role for tax expense, some recent research finds that tax expense surprise, especially its current component, is positively associated with stock returns. Holding...

Ball, Kothari, and Nikolaev (2011) make two major claims in their recent working paper titled “On estimating conditional conservatism.” While they agree that the effect documented in Patatoukas and Thomas (2011) biases the conditional conservatism estimate proposed in Basu (1997), they claim...

Financial economists view the tax benefits of leasing as a complex function of the tax deductions and income associated with rentals, depreciation, and interest attributed to lessors and lessees facing different tax rates. We offer two ways to simplify that complexity using the concept of...

Despite the conceptual appeal and popularity of the differential timeliness (DT) measure of conditional conservatism proposed in Basu (1997), Dietrich et al. (2007) and Givoly et al. (2007) have identified considerable biases associated with that measure. We renew their call to avoid using the...

While levels of actual and consensus forecast earnings per share (EPS) vary with scale (measured typically by share price), magnitudes of the difference do not vary with scale. That is, forecast errors within a certain range (e.g., plus/minus 5 cents per share) are equally likely for both...

It is common in business analyses to invoke different efficiencies generated by scale. Growth is associated with declining average costs/sales and rising profit margins. Factors cited include the relatively fixed nature of some costs, increased bargaining power, and network effects. We...

Prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry. We document a stock market anomaly associated with this phenomenon of intra-industry information transfers by showing that the stock...

Prior research has documented that earnings announcements provide information not only about the announcing firm but also about other firms in the same industry. We document a stock market anomaly associated with this phenomenon of intra-industry information transfers by showing that the stock...