Valuation of tax expense

Jacob Thomas () and Frank Zhang ()
Additional contact information
Jacob Thomas: Yale University
Frank Zhang: Yale University

Review of Accounting Studies, 2014, vol. 19, issue 4, No 5, 1436-1467

Abstract: Abstract As tax expense reflects value lost to taxes paid, it should be negatively associated with value, provided nontax, value-relevant information is controlled for. However, valuation regressions estimated in prior research—using contemporaneous tax expense and nontax variables—document substantial variation in the coefficients on tax expense, ranging from significant negative to significant positive values. We show this variation is (a) caused by the omission of expected future profitability, and (b) explained by many factors that cause variation in the correlations among included variables and omitted future profitability. Unfortunately, difficulties associated with separating the impact of individual factors hampers tax research investigating determinants of the value relevance of tax expense.

Keywords: Tax expense; Stock return; Profitability; Value relevance; Valuation; G12; G14; M41; H25 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11142-013-9274-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:19:y:2014:i:4:d:10.1007_s11142-013-9274-3

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-013-9274-3

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().