Is There Information Content in the Tax Footnote?
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)
February 10, 2011
2011 American Taxation Association Midyear Meeting Paper: JATA Conference
McCombs Research Paper Series No. ACC-01-11
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.
Number of Pages in PDF File: 51
Date posted: February 11, 2011 ; Last revised: September 20, 2012