We study the stock price reaction to news about tax aggressiveness. We find that, on average, a company's stock price declines when there is news about its involvement in tax shelters, but the reaction is small relative to reactions to other corporate misdeeds. We find some limited evidence for...

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...

Income reported to shareholders (book income) and income reported to the U.S. Internal Revenue Service (taxable income) are alternative measures of U.S. corporate economic performance discussed in recent research, academic texts, and by U.S. legislators. In measuring economic performance,...

This article offers a model that articulates how the capitalization of costs affects contemporaneous earnings and the growth path of expected earnings. It makes three points. First, reported earnings under successful efforts are more price-relevant than earnings under full costing or full...

How does the presence of a growth option affect expected earnings growth? This paper analyzes a firm with one growth option and an accrual accounting policy that, in the absence of a growth option, would equate accounting earnings to Hicksian earnings. Under this accounting policy, the presence...

The concept of residual income has become popular in recent years due, in part, to the Ohlson 1995 article on residual income valuation. Since Ohlson assumed clean surplus accounting in that article, the concept of residual income and clean surplus accounting have become intimately linked in the...

This study examines the association between stock prices and tax credits for new investment, which appear in the balance sheet as a tax-free reserve. A number of valuation models were developed for companies listed on the Athens Stock Exchange during the period 1990 - 1994. The empirical...

Using a valuation framework, we show that two dimensions of tax avoidance, uncertainty and the level of expected future tax rates, are jointly related to firm value and need to be expressed as a ratio. We confirm the importance of a composite measure of tax avoidance adjusted for tax uncertainty...

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...