Analysts, Taxes, and the Information Environment

44 Pages Posted: 20 Aug 2014 Last revised: 13 Nov 2018

See all articles by Sangwan Kim

Sangwan Kim

University of Massachusetts Boston

Andrew Schmidt

North Carolina State University

Kelly Wentland

George Mason University - Department of Accounting

Date Written: November 11, 2018

Abstract

This paper investigates whether analysts incorporate tax-based earnings information into their annual earnings forecasts to a different degree than non-tax earnings information and the extent to which information environment attributes affect how analysts incorporate tax-based earnings into their earnings forecasts. We find that analyst forecasts mis-estimate tax-based earnings to a greater extent than other earnings components. Further, we find that information environment attributes moderate both the association between analyst forecast errors and tax-based earnings information and the difference in the association between analyst forecast errors and tax-based earnings information relative to the association between analyst forecast errors and non-tax earnings information. Combined, these results suggest that forecasting tax-based earnings information is more difficult for analysts relative to forecasting other accounting information. This research answers the call from Graham, Raedy, and Shackelford (2012) for more research on users of tax-based information in the financial statements.

Keywords: Analysts, Taxes, Information Environments

JEL Classification: H25, M41, D82, G14

Suggested Citation

Kim, Sangwan and Schmidt, Andrew P. and Wentland, Kelly, Analysts, Taxes, and the Information Environment (November 11, 2018). Available at SSRN: https://ssrn.com/abstract=2482733 or http://dx.doi.org/10.2139/ssrn.2482733

Sangwan Kim

University of Massachusetts Boston ( email )

100 Morrissey Blvd.
Boston, MA 02125
United States

Andrew P. Schmidt (Contact Author)

North Carolina State University ( email )

Raleigh, NC 27695-8113
United States

HOME PAGE: http://https://poole.ncsu.edu/people/apschmid/

Kelly Wentland

George Mason University - Department of Accounting

Fairfax, VA
United States

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