Book-Tax Differences as an Indicator of Financial Distress

Noga, Tracy; Schnader, Anne L.

doi:10.2139/ssrn.2159922

Cited by 6 publications

(10 citation statements)

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“…This finding runs contrary to others reported in the literature, in which various studies have shown the utility of BTD, such as in predicting financial difficulties (Schnader & Noga, 2013), persistence and deterioration of earnings (Phillips et al, 2003;Hanlon, 2005;Blaylock et al, 2012), indication of earnings and tax management (TANG, 2006;FORMIGONI, ANTUNES & PAULO, 2009) and profits growth (JACKSON, 2009).…”

Section: Results Of Model 1 -Btd As a Determinant Of Credit Ratingcontrasting

confidence: 79%

“…In this respect, some international and Brazilian studies in the recent literature related to various aspects of the informational content of BTD can be mentioned, such as the persistence of earnings (PHILLIPS et al, 2003;HANLON, 2005;BLAYLOCK et al, 2012;MARTINEZ and SOUZA, 2015), earnings and tax management (TANG, 2006;FORMIGONI, ANTUNES andPAULO, 2009), profit growth (JACKSON, 2009), prediction of bankruptcy (SCHNADER and NOGA, 2013) and credit analysis (AYRES, LAPLANTE and McGUIRE, 2010).…”

Section: Informative Potential Of Btdmentioning

confidence: 99%

“…An extensive literature suggests BTD contributes to the risk of reduced earnings quality (NOGA & SCHNADER, 2013), in which firms that present large BTDs have less persistent profits (PHILLIPS et al, 2003;HANLON, 2005;BLAYLOCK et al, 2012).…”

Section: Informative Potential Of Btdmentioning

confidence: 99%

“…With respect to the use of the information contained in BTD to forecast bankruptcy, Schnader and Noga (2013) investigated the association between changes in ABTD and the predictability of bankruptcy, concluding that this information significantly increases the probability of bankruptcy, so it can be used as a tool to identify firms that are more likely to go bust.…”

Section: Informative Potential Of Btdmentioning

confidence: 99%

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Book-Tax Difference, Earnings Management and Bond Ratings in the Brazilian Market

Miiller¹,

Martinez

2016

ruc

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This article investigates whether the credit rating of bond issues in the Brazilian market is influenced by the differences between book income and taxable income (BTD), as well earning management practices, based on a sample of all nonfinancial firms that issued bonds in the period from 2004 to 2014 with published financial information, resulting in a final sample of 96 observations. The results indicate BTD does not determine the credit rating in the Brazilian market. Additionally, we tested the influence on credit rating of propensity for earnings management (EM) and tax management (TM). The results indicate as earnings management increases, ratings tend to decline, while firms that engage in aggressive tax management are not penalized. The study of this phenomenon can help to predict the credit rating in Brazil, and would allow identifying factors that affect it and actions to reduce the perception of risks to solvency, and consequently the cost of debt. Keywords: Book-tax differences; Earnings management; Bonds; Rating.Resumo O presente estudo investigou se o rating de crédito na emissão de debênture no mercado brasileiro é determinado em parte pelas diferenças entre o lucro contábil e tributário (BTD), bem como práticas de gerenciamento de resultados. Esta relação foi realizada mediante estudo de todas empresas que emitiram debêntures no período de 2004 a 2014 e que dispõem das informações financeiras publicadas, exceto as empresas financeiras, resultando em uma amostra final de 96 observações. Os resultados indicam que a BTD não determina o rating de crédito no mercado brasileiro. Adicionalmente, foi testada a determinação do rating de crédito pela propensão ao gerenciamento de resultado (EM) contábil e o tributário (TA). Os resultados indicaram que as empresas que gerenciam o seu resultado contábil para aumentá-lo são penalizadas com um rebaixamento, ao passo que as empresas propensas a um planejamento tributário mais agressivo não são penalizadas. O estudo deste fenómeno pode ajudar a estimar o rating de crédito no Brasil, e permitir identificar os fatores que o afetam e as ações para reduzir a percepção de riscos para a solvência e, consequentemente, o custo da dívida. Palavras Chave: Diferença entre lucro contábil e tributário; Gerenciamento de resultado contábil; Debêntures; Ratings. ResumenEste estudio investigó si la calificación crediticia de la emisión de obligaciones en el mercado brasileño está determinada en parte por las diferencias entre el resultado contable y tributaria (BTD) y practicas de earnings management. Esta relación fue realizado por el estudio de todas las empresas que han emitido bonos 2004-2014 y que tengamos la información financiera publicada, excepto las sociedades financieras, lo que resulta en una muestra final de 96 observaciones. Los resultados indican que BTD no determina la calificación crediticia en el mercado brasileño. Además, se puso a prueba la determinación de la calificación crediticia de la propensión a gestión de resultados (GI) contable y planeamiento...

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Section: Results Of Model 1 -Btd As a Determinant Of Credit Ratingcontrasting

confidence: 79%

Section: Informative Potential Of Btdmentioning

confidence: 99%

Section: Informative Potential Of Btdmentioning

confidence: 99%

Section: Informative Potential Of Btdmentioning

confidence: 99%

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Book-Tax Difference, Earnings Management and Bond Ratings in the Brazilian Market

Miiller¹,

Martinez

2016

ruc

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“…According to Schnader, Noga (2013), there is one more reason for reporting of the differences between firm's book income and its taxable income. It is a questionable reason.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Comparison of Deferred Tax Materiality Reporting in Accordance with Continental and Anglo-Saxon Reporting System

Habanec

Bohušová

2017

Acta Univ. Agric. Silvic. Mendelianae Brun.

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Determinants and consequences of financial distress: review of the empirical literature

Habib

Costa

Huang

et al. 2018

Accounting & Finance

127

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We synthesise the empirical literature on the determinants and consequences of financial distress, critique the findings and offer suggestions for future research. We categorise these indicators into (i) firm-level fundamental determinants, (ii) macroeconomic determinants and (iii) firm-level corporate governance determinants. We categorise the consequences into (i) financial reporting and auditing consequences, (ii) firm-level operational consequences, (iii) capital market consequences and (iv) corporate governance consequences. We suggest that future research can make a more meaningful contribution, by developing more comprehensive models of predicting financial distress which will entail a departure from the current partial analysis to a more holistic complex analysis.

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Book-Tax Differences as an Indicator of Financial Distress

Cited by 6 publications

References 0 publications

Book-Tax Difference, Earnings Management and Bond Ratings in the Brazilian Market

Book-Tax Difference, Earnings Management and Bond Ratings in the Brazilian Market

Comparison of Deferred Tax Materiality Reporting in Accordance with Continental and Anglo-Saxon Reporting System

Determinants and consequences of financial distress: review of the empirical literature

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