We find evidence that investors misprice information contained in book-tax differences (BTDs), measured as the ratio of taxable income to book income, TI/BI. Low TI/BI predicts worse earnings growth and abnormal stock returns than high TI/BI. We find that short sellers and insiders arbitrage BTD mispricing, but the arbitrage is imperfect because of constraints on short selling and insider trading. Under SFAS No. 109 the predictability is stronger for TEMP/BI, the temporary component of TI/BI, which reflects greater managerial discretion. The results are incremental to a large set of known accruals-based anomaly predictors. We suggest that a sunshine policy of disclosing a reconciliation of book and taxable incomes can reduce mispricing of BTDs and improve capital market resource allocation.
We examine the impact of distance on Internet search, and the effect of the "local bias" in search on the stock market response around earnings announcements. We find significant local bias in search behavior. Motivated by theories explaining local bias, local information advantage and familiarity bias, we predict and find that firms with higher local bias in search experience higher bid-ask spreads, lower trading volumes, and lower earnings response coefficients at the time of earnings announcements, consistent with non-local investors relying more than locals on public information announcements. Consistent with local information advantage, we find that in the week prior to the announcement, firms with higher local bias have higher bid-ask spreads, higher trading volumes, and returns that are more predictive of the coming earnings surprise. Consistent with familiarity bias, firms with higher local bias in search experience stronger post-earnings-announcement drift. We use unique predictions, propensity score matching, and two-stage least squares to identify the effects of local bias separately from the effects of overall visibility. Overall, we show there is significant local bias in search, and that this local bias has a significant impact on the market response around earnings announcements.
The purpose of this study is to determine the impact of book-tax conformity, investment opportunity set, and audit quality to earnings response coefficient. This research is conducted on Indonesian manufacturing company listed in Indonesia Stock Exchange 2016-2018. The data of this research are obtained from the financial statements of the companies and analyzed using multiple linear regression method. The results of this study concluded that book-tax conformity, investment opportunity set, and audit quality have significant impact on earnings response coefficient. These results indicate that investor has consider the conformity between income tax and accounting report, market as well as book value of a company assets, and the quality of an audit that the company proceed.
PSAK 73 is the latest rental accounting standard adopted from IFRS 16. PSAK 73 is effective for 2020. Loan rental classification is a type of rental allowed in PSAK 73 where the recognition, measurement, presentation and disclosure of property rights become more detailed in the position report finance. This study aims to analyze the financial ratios at PT Telekomunikasi Indonesia (Persero) Tbk which has implemented PSAK 73. The research period used was 2019-2020. The data used is secondary data obtained from the IDX. This study uses a quantitative descriptive method to assess the company's financial performance before and after the implementation of PSAK 73. The results showed that there was a significant differences in the liquidity ratio that was projected with the current ratio, solvency ratios that were projected with debt to asset ratio and debt to equity ratio, and the ratio of activities with total asset turnover between 1 (one) year before with 1 (one) after the implementation of PSAK 73 and there was no significant difference in the profitability ratio that was projected with return on assets and return on equity between 1 (one) year before with 1 (one) years after the implementation of PSAK 73.
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