Does Book-Tax Conformity Deter Opportunistic Book and Tax Reporting? An International Analysis

Tang, Tanya Y. H.

doi:10.1080/09638180.2014.932297

Cited by 79 publications

(166 citation statements)

References 36 publications

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“…While recent evidence provided by Watrin et al (2014) and Blaylock et al (2015), for instance, finds that book-tax conformity is associated with significantly more earnings management, Tang (2015) concludes that high book-tax conformity deters overall earnings management and tax avoidance. Furthermore, existing studies partly report opposing results with respect to the influence of BTD on earnings management and/or tax sheltering.…”

Section: Introductionmentioning

confidence: 97%

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The Implications of Book-Tax Differences: A Meta-Analysis

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. http://ftp.zew.de/pub/zew-docs/dp/dp17003.pdf Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar. Terms of use: Documents inDis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. The Implications of Book-Tax Differences: A Meta-AnalysisMaria Theresia Evers*, Ina Meier**, Katharina Nicolay*** November 2016 AbstractOver the last decade, a large body of tax accounting literature on the association between book-tax conformity (BTC)/book-tax differences (BTD) and firms' opportunistic reporting behavior has emerged. Yet, existing empirical evidence on the questions whether increased book-tax conformity actually reduces Earnings Management (EM) and/or Tax Sheltering (TS) and whether book-tax differences are really indicative of such opportunistic reporting behavior is not yet clear. We therefore conduct a meta-analysis aimed at identifying the sources of heterogeneity in primary studies and at providing a consensus estimate with respect to the sign and the statistical significance level for the examined association. Our qualitative literature review reveals that major sources of heterogeneity in the study design include differences in the proxies for EM and TS and in the measures used to determine BTD and BTC. Our meta-regression results show that BTD are indeed indicative of opportunistic reporting behavior, and even more so of EM. These results are, however, weaker for studies that determine BTD only roughly as the difference between book and estimated taxable income instead of using more specific BTD proxies. Moreover, examining actual BTD computed from tax returns instead of only approximating these from financial statements strongly increases the effects. Hence, efforts taken to accurately determine BTD seem to be worth wile when it comes to the explanatory power for opportunistic reporting. Furthermore, our results suggest a negative association between book-tax conformity and EM/TS, which we interpret as an indicator for higher conformity indeed being effective in reducing aggressive reporting.JEL Classificat...

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Section: Introductionmentioning

confidence: 97%

“…4 There are, however, only very few studies which examine the effects of BTD on the interplay of earnings management and tax sheltering. For examples see Tang (2015); Frank et al (2009). Table 5 in the Appendix for journal abbreviations.…”

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confidence: 99%

The Implications of Book-Tax Differences: A Meta-Analysis

2016

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“…The international discussion of the authoritative principle does not explicitly deal with the question whether commercial profit conforms to the ability-to-pay-principle. However, we will see in chapter 4 that studies implicitly deal with equality of taxation when they put forward the argument that a one-book system reduces the taxpayers' willingness to avoid explicit taxes Desai, 2003Desai, , 2005Tang 2015;Whitaker, 2005). The second main difference is that we consider genuine uncertainty.…”

Section: Introductionmentioning

confidence: 99%

“…Part of these studies examine the effects of book-tax conformity on the information quality and earnings management (Blaylock, Gaertner, & Shevlin, 2015;Hanlon & Heitzman, 2010;Hanlon, Laplante, & Shevlin, 2005;Hanlon, Maydew, & Shevlin, 2008;McClelland & Mills, 2007). Others put forward the argument that a one-book system reduces the taxpayers' willingness to avoid explicit taxes (Atwood, Drake, Myers, & Myers, 2012;Desai 2003;Tang, 2015;Whitaker, 2005). Since in Germany, a one book-system was introduced in 1874 (Pfaff & Schröer, 1996), we can find a widespread discussion in German literature.…”

Section: Introductionmentioning

confidence: 99%

“…Previous studies either take a neoclassical view (Hundsdoerfer et al 2008;Schanz & Schanz, 2010;Wagner, 2000Wagner, , 2014 that excludes genuine uncertainty or they do not refer explicitly to any economic theory (Weber-Grellet, 1994;Wehrheim & Fross, 2010). The empirical studies also do not refer to a theoretical framework under genuine uncertainty Blaylock et al, 2015;Desai, 2003;Hanlon & Heitzman, 2010;Hanlon et al, , 2008McClelland & Mills, 2007;Tang, 2015;Whitaker, 2005). Although Schneider considers genuine uncertainty in taxation goals, he does not discuss a tax effects theory under genuine uncertainty (Schneider, 1997).…”

Section: Introductionmentioning

confidence: 99%

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Is a One-book-system Adequate? A Framework for Tax Law Analysis Under Genuine Uncertainty

Schmiel

Weitz

2017

Accounting, Economics, and Law: A Convivium

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Abstract:This paper examines whether a one-book-system that takes the commercial law profit definition as tax base (the so-called authoritative principle) is adequate from an evolutionary point of view. We consider firstly the case that European International Financial Reporting Standards (EU-IFRS) are relevant for all statements with the authoritative principle based on EU-IFRS. Secondly, we examine the fact that EU-IFRS focus on the consolidated annual accounts and that the national accounting principles are relevant for individual statements. Tax law analysis under genuine uncertainty requires a framework and we present such a framework. It entails an interpretation of equality of taxation, a hypothesis on the functioning of markets, an interpretation of realizable and desirable market goals, tax effects hypotheses, and action hypotheses for personal and corporate companies under genuine uncertainty. Contrary to the mainstream of accounting literature, from our evolutionary point of view, the authoritative principle is adequate. The reason is that commercial profit is an adequate instrument to achieving the tax goal equality of taxation in the sense of reducing expectable tax avoidance decisions. This is the case because according to evolutionary action hypotheses as well as tax effects hypotheses, commercial profit can be a subjectively rational decision criterion for personal and corporate companies alike. Equality of taxation is for its part in line with the evolutionarily interpreted social values freedom of choice and equality before the law. Since we focus on the question if the existing commercial profit concept can be an adequate tax base, we do not discuss whether we would have more reasons to take a conservative profit concept as tax base rather than EU-IFRS. Just as little, we analyze whether it is better to take EU-IFRS profit as tax base although national accounting principles are relevant for individual statements.Keywords: ability to pay-principle, authoritative principle, equality of taxation, evolutionary tax effects hypotheses, evolutionary analysis of tax law, horizontal equity, vertical equity JEL classification: B53, K34, M48

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Book‐Tax Differences, Corporate Governance Effectiveness and Audit Quality: An Interactive Effects

Riguen¹,

Kachouri²,

Jarboui³

2018

J Corp Accounting Finance

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In this article, we aim to answer the important questions of whether the corporate governance effectiveness affects the relationship between book‐tax differences (BTDs) and audit quality. We also aim to determine whether the variability between BTDs and audit quality is moderated by corporate governance index (CGI). The primary aim of the present study is to contribute to improving the existence of an interaction between BTDs, audit quality, and CGI. This study uses a sample of 28 nonfinancial listed Tunisian companies and covers an eight‐year period from 2005 to 2015. To test the hypotheses of this research, a generalized least squares (GLS) and ordinary least squares (OLS) regression was applied. The results obtained show that, for the Tunisian companies, a positive association between BTDs and audit quality. The current study also provides evidence that corporate governance moderates the relationship between BTDs and audit quality. The findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering the quality of corporate governance practices and tax practices in Tunisian context. The findings of this study can help Tunisian regulators in creating corporate governance disclosure requirements. The findings also provide the African business community insights concerning audit quality, tax practices, and corporate governance. This article extends the existing literature, by examining the inter‐relationship between corporate governance, BTDs, and audit quality. © 2019 Wiley Periodicals, Inc.

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Does Book-Tax Conformity Deter Opportunistic Book and Tax Reporting? An International Analysis

Cited by 79 publications

References 36 publications

The Implications of Book-Tax Differences: A Meta-Analysis

The Implications of Book-Tax Differences: A Meta-Analysis

Is a One-book-system Adequate? A Framework for Tax Law Analysis Under Genuine Uncertainty

Book‐Tax Differences, Corporate Governance Effectiveness and Audit Quality: An Interactive Effects

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