Security Analyst and Stock Market Efficiency in Anticipating Tax-Motivated Income Shifting

Shane, Philip B.; Stock, Toby

doi:10.2308/accr.2006.81.1.227

Cited by 43 publications

(32 citation statements)

References 40 publications

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“…This difference in sample composition however could explain the differential results regarding the significance of the TAX variable in the two papers. 9 Shane and Stock (2006) investigate the extent to which investors correctly interpret the temporary reported book income effects of tax-motivated income shifting around the Tax Reform Act of 1986. They report evidence consistent with analysts and investors failing to correctly identify and price these temporary effects.…”

Section: Key Provisions Of the Repatriation Tax Holidaymentioning

confidence: 99%

Examining Investor Expectations Concerning Tax Savings on the Repatriations of Foreign Earnings under the American Jobs Creation Act of 2004

Oler

Shevlin

Wilson

2007

Journal of the American Taxation Association

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The American Jobs Creation Act of 2004 was signed into law on October 22, 2004. One of the most significant aspects of this legislation is a temporary tax holiday for dividend repatriations from foreign subsidiaries. U.S. multinational corporations may elect during a one-year window to deduct 85 percent of extraordinary cash dividends received from foreign subsidiaries. In this study, we model the impact that this legislation has on a firm's decision to either repatriate or reinvest foreign earnings from abroad. We then examine investors' assessment of how U.S. multinational corporations will respond to the temporary tax holiday. Our results indicate that investors repriced the tax liability consistent with investors anticipating that U.S. multinational corporations will repatriate a significant portion of their permanently reinvested foreign earnings during the tax holiday.

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Section: Key Provisions Of the Repatriation Tax Holidaymentioning

confidence: 99%

Examining Investor Expectations Concerning Tax Savings on the Repatriations of Foreign Earnings under the American Jobs Creation Act of 2004

Oler

Shevlin

Wilson

2007

Journal of the American Taxation Association

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“…Past studies provide conflicting evidence on whether analysts recognize earnings management and hence take account of earnings management when preparing their forecasts. Some researchers show that analyst do not fully recognize the effect of earnings management (Elgers, Lo & Pfeiffer 2003;Shane & Stock 2006). On the other hand, Ettredge, Shane and Smith (1995) found that analysts use alternative information to effectively adjust their forecasts for the effect of the earnings management.…”

Section: Literature Review and Hypotheses Development Earnings Managementioning

confidence: 99%

Analyst Forecast Accuracy and Earnings Management

Embong

Hosseini²

2018

AJAG

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This paper investigates the reciprocal or endogenous relationship between earnings management and analyst forecast accuracy. Earnings number is one of the most referred information especially in relation to investment decision-making. Financial analysts use earnings number and its trend in coming up with their forecast. The quality of earnings reported hence may affect the accuracy of forecast made by analysts. Quality of reported earnings is often indicated by earnings management. One of the motivations to manage earnings is to meet or beat analyst forecasts. If analysts failed to account for earnings management, it is possible that earnings manipulation in the previous year may mislead analysts and affect forecast accuracy for current and/or future years. Thus, relationship between earnings management and forecast accuracy could be endogenous or reciprocal, where managers react upon analysts' forecasts and analysts use reported earnings to make forecast. Previous research on this area assume earnings management and forecast accuracy as exogenous variables. This study on the other hand incorporates the reciprocal relationship between analyst forecast accuracy and earnings management in examining whether analysts can detect earnings management. The relationship between earnings management and analyst forecast accuracy of 110 firms listed on Main board of Bursa Malaysia from 2007 to 2012 is analyzed using dynamic panel system Generalized Method of Moments (GMM) estimator. The year 2007 to 2012 is chosen because this represents the period of convergence from MASB to MFRS. Result indicates that meeting or beating the forecast is one of the incentives for earnings management although not a strong incentive. On the other hand, earnings management significantly influence forecast accuracy, indicating that somehow, analysts trust the reported earnings. This study adds to the literature by addressing the possible endogenous and dynamic relationship between earnings management and analyst forecast accuracy.

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“…Many of the empirical studies discussed in this review will show that in the incentive section of signaling or concealing private information troubled firms manage the earnings to conceal their financial struggle. In addition, there are studies which examine the failed perception through the investors of a strategy with a view to an economic optimizing, like tax planning, by the management (Shane and Stock 2006). Furthermore, some studies recognize how managers can improve the financial information by managing earnings (e.g.…”

Section: Definition and Motivations For Earnings Managementmentioning

confidence: 99%