A Unifying Model of How the Tax System and Generally Accepted Accounting Principles Affect Corporate Behavior

45 Pages Posted: 22 Jan 2007

See all articles by Douglas A. Shackelford

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

James Sallee

University of Michigan at Ann Arbor

Multiple version iconThere are 2 versions of this paper

Date Written: January 12, 2007

Abstract

This paper models the impact of the tax system and GAAP on the real and financial reporting decisions of corporations. It provides a first step toward joint evaluation of taxation and financial reporting in the standard economic analyses of corporate behavior. The key finding is that value arises from real decisions that provide firms with discretion in their tax and financial reporting. This desire for flexibility modifies the optimal decisions of firms, in theory, and we provide examples that illustrate this behavior in the real world.

Keywords: taxation, financial reporting, accounting, discretion

JEL Classification: H25, H21, M41, M44

Suggested Citation

Shackelford, Douglas A. and Slemrod, Joel B. and Sallee, James, A Unifying Model of How the Tax System and Generally Accepted Accounting Principles Affect Corporate Behavior (January 12, 2007). Available at SSRN: https://ssrn.com/abstract=958436 or http://dx.doi.org/10.2139/ssrn.958436

Douglas A. Shackelford (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3197 (Phone)
919-962-4727 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James Sallee

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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