As tax expense reflects value lost to taxes paid, it should be negatively associated with value, provided non-tax, value-relevant information is controlled for. However, valuation regressions estimated in prior research — using contemporaneous tax expense and non-tax variables — document...

There are various valuation methodologies applicable to both the financial evaluation of projects as to the valuation of companies. First, have developed methods of Discounted Cash Flows (DCF), which allow discounting, or bring to present value, a series of projected future cash flows over time....

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...

In this paper, we provide an empirical work in order to test the tax-adjusted market valuation (residual income) model. Feltham-Ohlson's (1995) residual income model can be extended by adding corporate tax: firm market value is a function of the bottom line after-tax accounting data, e.g., book...

SFAS 109, Accounting for income taxes, was criticized for allowing firms to set arbitrarily high valuation allowances against deferred tax assets at adoption as quot;hidden reservesquot; that firms could use in future periods to manage earnings. Consistent with these claims, bank managers make...

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...

Firms invest non-trivial resources to avoid paying taxes. One of the presumed incentives for doing so is that it should increase the value of the firm. Surprisingly, a large number of studies find that tax expense is positively related to stock returns, suggesting that paying more taxes is good...

We examine empirically whether the use of the partial method for deferred taxes provides incremental information of use to investors. Specifically, we test whether U.K. capital markets valued unrecognized deferred tax amounts reported in the footnotes to U.K. annual reports, pursuant to U.K....

This paper compares two attributes of a deferred tax liability (DTL) that arise from differences in book and tax depreciation methods. The first attribute is the effect of the DTL on the market value of the firm. The second is the length of time between when the asset is placed into service and...