The Impact of Earnings Management and Tax Planning on the Information Content of Earnings
Linda H. Chen
Washington State University
Dan S. Dhaliwal
University of Arizona - Department of Accounting
Mark A. Trombley
University of Arizona - Eller College of Management
This paper examines the effect of tax planning and earnings management on the relative informativeness of book income and taxable income. We conduct two sets of tests documenting (1) the incremental effect of tax planning and earnings management on the relative informativeness of book and taxable income and (2) the relation between voluntary conformity and the relative informativeness of book and taxable income. Based on these two sets of tests, we conclude that tax planning and earnings quality jointly affect the relative informativeness of book and taxable income.
Number of Pages in PDF File: 33
Keywords: earnings management, taxable income, book income, information content
JEL Classification: G12, G32, H24, H25, M41, M43
Date posted: November 10, 2007 ; Last revised: July 30, 2008
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