The paper studies the effect of uncertainty in tax avoidance on firm value. We first show in a clean surplus valuation model that expected tax rates interact with expectations about future profitability. This paper builds and tests a valuation framework that incorporates two outcome dimensions...

The paper studies the effect of uncertainty in tax avoidance on firm value. We first show in a clean surplus valuation model that expected tax rates interact with expectations about future profitability. This paper builds and tests a valuation framework that incorporates two outcome dimensions...

The paper studies the effect of uncertainty in tax avoidance on firm value. We first show in a clean surplus valuation model that expected tax rates interact with expectations about future profitability. This paper builds and tests a valuation framework that incorporates two outcome dimensions...

Increasing the conformity between accounting earnings and taxable income has been proposed to improve financial reporting and curtail aggressive tax planning. We find, however, that increasing conformity results in earnings that are less informative. Our inquiry exploits a unique sample of firms...

Implicit taxes reflect the extent (if any) to which tax-favored assets bear lower pretax returns than do tax-disfavored assets of similar risk. Prior research on implicit taxes has met with mixed results, particularly in equity securities, because of the difficulty in separating tax effects from...

We investigate the ability of a tax-based fundamental - the ratio of tax-to-book income - to predict earnings growth and stock returns and to explain the earnings-price ratio. This tax fundamental reflects both temporary and permanent book-tax differences as well as tax accruals, such as changes...

We investigate the equity valuation effects of the Pension Protection Act of 2006 (hereafter PPA 2006). The PPA 2006 has two main provisions: (1) firms must fully fund their pension plans within seven years (previously allowed 30 years to fund 90 percent of the pension liability), and (2) firms...

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced shareholder level taxes on equity income. If shareholder level taxation is a component of cost of equity capital, then the cost of equity capital should decrease after the Tax Act. We find that the cost of equity capital decreases...

This brief case asks students to assess the impact of an acquisition on the valuation of a company's net operating losses. Specifically, students assess whether an article discussing Alcatel S.A. 's acquisition of Lucent has assessed the correct value of Lucent's net operating losses. The case...

This study investigates whether glamour companies have higher effective tax rates than value companies. Glamour companies are defined using a Lakonishok et al. (1994) definition as companies that have a high price-to-earnings ratio and high sales growth. Conversely, value companies have a low...