abstract: Existing literature consistently documents a relationship between book-tax differences and future financial performance. Specifically, large book-tax differences are associated with lower earnings persistence. I contend that one reason the tax information contained in financial statements is informative about future earnings is that the relationship between book income and taxable income captures information about a firm's life cycle stage. Using a life cycle measure from the literature, I use fundamental analysis to group firm-year observations into life cycle stages and document a link between book-tax differences and firm life cycle. I build on prior studies that find a relation between earnings persistence and book-tax differences, and earnings persistence and firm life cycle. I find that after controlling for firm life cycle stage, the association between large positive book-tax differences and lower earnings persistence does not hold. My results offer an economic theory based explanation for the relation between book-tax differences and earnings persistence as an alternative explanation to findings in prior research. / Dissertation/Thesis / Ph.D. Accountancy 2012
| Identifer | oai:union.ndltd.org:asu.edu/item:15021 |
| Date | January 2012 |
| Contributors | Drake, Katharine (Author), Mikhail, Michael (Advisor), Brown, Jennifer (Committee member), Martin, Melissa (Committee member), Arizona State University (Publisher) |
| Source Sets | Arizona State University |
| Language | English |
| Detected Language | English |
| Type | Doctoral Dissertation |
| Format | 75 pages |
| Rights | http://rightsstatements.org/vocab/InC/1.0/, All Rights Reserved |
Page generated in 0.0013 seconds