Analysts’ Tax Questions During Earnings Conference Calls and ETR Forecasts

51 Pages Posted: 11 Sep 2024

See all articles by Colin Koutney

Colin Koutney

Donald G. Costello College of Business at George Mason University

JK Aier

George Mason University; George Mason University

Sebastian A. Tideman-Frappart

Syracuse University

Date Written: September 11, 2024

Abstract

This study examines analysts’ tax questions during earnings conference calls and their effective tax rate (ETR) forecasts. For firms that issue annual ETR forecasts, we find that greater analyst engagement during earnings conference calls, especially about tax topics, is positively associated with the analyst issuing an ETR forecast that deviates from manager’s ETR forecast. However, notwithstanding potential additional tax information obtained in these calls, analysts’ deviating ETR forecasts have lower forecast accuracy than analysts who reiterate managers’ ETR forecasts, even after controlling for differences in managers’ and analysts’ pre-tax forecasts. We interpret this result as suggesting analysts deviate to gain visibility, even at the cost of lower forecast accuracy. Accordingly, our results suggest that, on average, analysts’ deviation from managers’ ETR forecasts is not incrementally informative. On the contrary, managers’ ETR forecasts seem to be an unbiased estimate that investors and other stakeholders should focus on.

Keywords: Analyst earnings forecasts, Management earnings forecasts, Earnings conference calls, Analyst questions, Effective tax rates

JEL Classification: G17, M41

Suggested Citation

Koutney, Colin and Aier, Jagadison K and Tideman-Frappart, Sebastian A., Analysts’ Tax Questions During Earnings Conference Calls and ETR Forecasts (September 11, 2024). Donald G. Costello College of Business at George Mason University Research Paper (forthcoming), Available at SSRN: https://ssrn.com/abstract=4953700 or http://dx.doi.org/10.2139/ssrn.4953700

Colin Koutney (Contact Author)

Donald G. Costello College of Business at George Mason University ( email )

Fairfax, VA 22030
United States

Jagadison K Aier

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

George Mason University ( email )

3301 North Fairfax Dr,
Hazel Hall
Arlington, VA 22201
United States

Sebastian A. Tideman-Frappart

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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