Working Paper: NBER ID: w15665
Authors: John Graham; Jana Raedy; Douglas Shackelford
Abstract: This paper comprehensively reviews Accounting for Income Taxes (AFIT). The first half provides background and a primer on AFIT. The second half reviews existing studies in detail and offers suggestions for future research. We emphasize the research questions that have been addressed (most of which relate to whether the tax accounts are used to manage earnings, and whether the tax accounts are priced by equity market participants) and highlight areas that have not received much research attention. We close with a call for a theoretical framework, more study of the inconsistencies between research and practice, and improved econometrics.
Keywords: Accounting for Income Taxes; Earnings Management; Tax Planning
JEL Codes: H25; M41; M48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax account manipulation (H26) | earnings outcomes (J31) |
| manipulation of valuation allowance and tax contingency accounts (M41) | meet or beat analysts' forecasts (G17) |
| deferred tax accounts (M41) | market prices (P22) |
| tax information (H26) | capital markets' reaction (G10) |
| estimated taxable income (H29) | market prices (P22) |