Abstract:Purpose -We analyze how debt burden and income taxes affect the earnings quality of Portuguese SMEs, using earnings persistence as a proxy for earnings quality. More specifically, we intend to find out whether the high indebtedness of these firms causes a greater tax effect than debt effect.Theoretical framework -While credit banks represent the main source of financing for SMEs, they tend to reduce their earnings in order to avoid taxes. However, this activity can be costly for their development, given that b… Show more
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