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Is There Information Content in the Tax Footnote?

51 Pages Posted: 11 Feb 2011 Last revised: 20 Sep 2012

Jana Smith Raedy

University of North Carolina at Chapel Hill

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

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Date Written: February 10, 2011

Abstract

Prior studies show that aggregated book-tax differences have information content that is incremental to pre-tax book income. We test whether the detailed book-tax difference disclosures from statements of deferred tax position and rate reconciliations have information content that is incremental to the aggregate book-tax difference. Using hand-collected data from the Fortune 250 from 1993 to 2007, we find little evidence that the equity markets price different book-tax differences differently, consistent with no incremental information content. Further work is needed to explain why the sum of the book-tax differences matter to investors, but the parts do not.

Suggested Citation

Raedy, Jana Smith and Seidman, Jeri K. and Shackelford, Douglas A., Is There Information Content in the Tax Footnote? (February 10, 2011). 2011 American Taxation Association Midyear Meeting Paper: JATA Conference; McCombs Research Paper Series No. ACC-01-11. Available at SSRN: https://ssrn.com/abstract=1759266 or http://dx.doi.org/10.2139/ssrn.1759266

Jana Smith Raedy

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-7475 (Phone)
919-962-4727 (Fax)

Jeri K. Seidman

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

Douglas A. Shackelford (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3197 (Phone)
919-962-4727 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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