The Impact of Taxation on the Earnings Management of New Zealand Electric Power Boards

Posted: 26 Feb 1998

See all articles by Alastair Marsden

Alastair Marsden

University of Auckland - Business School

Jilnaught Wong

University of Auckland

Multiple version iconThere are 2 versions of this paper

Abstract

New Zealand electric power boards became subject to corporate income tax for the first time from April 1 1987. Effectively this amounted to a change in their corporate tax rate from zero to 48 percent. This paper investigates the extent to which New Zealand electric power boards manipulated their earnings in response to this regulatory change. The results are consistent with the hypothesis that managers of electric power boards increased discretionary expenses in the first taxable year. However there is no evidence of decreased discretionary expenses in the final tax-exempt year. The latter result may be due to the garbled measure of discretionary expenses because of structural changes in that year to cater for the next taxation regime.

JEL Classification: M41

Suggested Citation

Marsden, Alastair D.E. and Wong, Jilnaught, The Impact of Taxation on the Earnings Management of New Zealand Electric Power Boards. Available at SSRN: https://ssrn.com/abstract=55511

Alastair D.E. Marsden

University of Auckland - Business School ( email )

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Jilnaught Wong (Contact Author)

University of Auckland ( email )

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Room: 210/328
Auckland
New Zealand
(64 9) 3737599 Ext. 8528 (Phone)
(64) 9 373-7406 (Fax)

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