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It is well known that the objectives of financial accounting and tax accounting sometimes conflict, resulting in book-tax differences (BTDs). In this study we test for associations between measures of BTDs and measures of market participants’ uncertainty regarding the information conveyed in financial reports. The measures of market participant uncertainty are: (1) share turnover, (2) analyst forecast dispersion, and (3) stock return variance. We find positive associations between levels and variability of total BTDs and the three measures. After disaggregating BTDs into their permanent and temporary components, we find that both are positively associated with market uncertainty, although the permanent component of BTDs is generally more strongly and consistently associated with measures of uncertainty than is the temporary component. We interpret these results, in part, as indicative of the possible effect of uncertainty contained in BTDs, especially permanent BTDs, on the precision of the information conveyed in the financial statements.

This study addresses whether the financial turmoil surrounding the devaluation of the baht affected the value relevance of Thai accounting information. Our results suggest a decline in the value relevance of Thai book values and earnings following the devaluation. Prior to mid 1997 the Bank of Thailand pegged the value of the baht to a basket of currencies of which 80% was weighted to the US dollar. In response to pressure by currency speculators the bank abandoned its peg on July 2 1997 in favor of a managed float. The devaluation was followed by volatile exchange rates. The change in value relevance of accounting information after the devaluation may be attributable to the initial recognition of foreign exchange losses and the subsequent recognition of foreign exchange gains as exchange rates fell and then recovered.

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We assess the valuation implications of the fair value disclosures made for publicly traded securities accounted for under the equity method. We test the association between investors' stock price metrics and fair value disclosures while controlling for book values on a sample of 172 investor firm-years during 1993-1997. Our results indicate that the information in the fair value disclosures is incremental to the information provided by both an investment's equity method book value and equity method reported income. This suggests that there is nothing unique about investments in publicly traded common stock that involve significant influence that makes the fair value disclosures irrelevant for firm valuation. Copyright Blackwell Publishers Ltd, 2003.