51 Pages Posted: 11 Feb 2011 Last revised: 20 Sep 2012
Date Written: February 10, 2011
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: 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
By Mark Cowan