This study examines whether firms with profits before accruals management are more likely than firms with losses before accruals management to meet or exceed earnings benchmarks when pre-managed earnings are below those benchmarks. We extend Brown (2001) by documenting that the differential propensity to achieve earnings benchmarks by profitable and nonprofitable firms results from differential accruals management behavior. We find that firms with profits before accruals management are more likely than firms with losses before accruals management to have pre-managed earnings below both analysts' forecasts and prior period earnings and reported earnings above these benchmarks. Copyright 2006 The Authors Journal compilation (c) 2006 Blackwell Publishing Ltd.

We examine the effects of dividend imputation on corporate capital investment in New Zealand and Australia. The empirical findings indicate that: (1) dividend imputation stimulated corporate capital investment in both countries; (2) the positive impact of dividend imputation on capital investment overshadowed any negative effects arising from the new capital gains tax imposed in Australia; and (3) the dividend imputation effects on capital investment are most pronounced for highdividend-paying firms. In summary, we demonstrate the positive impact of dividend imputation on corporate capital investment. Our findings support the conclusions of the U.S. Treasury that the “traditional” double tax on corporate distributions increases the cost of equity capital to the corporate sector and creates a bias against investment by the corporate sector.

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