The Impact of Earnings Management and Tax Planning on the Information Content of Earnings

Chen, Linda H.; Dhaliwal, Dan S.; Trombley, Mark A.

doi:10.2139/ssrn.1028808

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The Impact of Earnings Management and Tax Planning on the Information Content of Earnings

33 Pages Posted: 10 Nov 2007 Last revised: 30 Jul 2008

See all articles by Linda H. Chen

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Mark A. Trombley

University of Arizona - Eller College of Management

Date Written: November 2007

Abstract

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.

Keywords: earnings management, taxable income, book income, information content

JEL Classification: G12, G32, H24, H25, M41, M43

Suggested Citation: Suggested Citation

Chen, Linda H. and Dhaliwal, Dan S. and Trombley, Mark A., The Impact of Earnings Management and Tax Planning on the Information Content of Earnings (November 2007). Available at SSRN: https://ssrn.com/abstract=1028808 or http://dx.doi.org/10.2139/ssrn.1028808