 To Shift or Not To Shift? Intertemporal Income Shifting as a Response to the Risk Capital Allowance Introduction in BelgiumKathleen Andries, Martine Cools and Steve Van Uytbergen European Accounting Review, 2017, vol. 26, issue 3, 531-559 Abstract: This study examines how firms shift profits from one period to another in response to the introduction of an allowance for corporate equity. We focus on the introduction of the risk capital allowance in Belgium by the law of 22 June 2005. We predict and find that firms with relatively low (but positive) earnings in 2006 have incentives to defer profits in 2005 and that this effect is stronger for firms with higher equity ratios. Conversely, we predict that firms that are highly profitable in 2006 and have large net operating loss carryforwards in 2005 have incentives to accelerate profits. We find that only subsets of firms react to the latter incentive, in particular firms with higher equity ratios. Our findings show that tax-related benefits motivate firms to engage in conforming tax avoidance and provide evidence of cross-sectional variations in their reaction to these incentives. These insights contribute to the literature outlining the costs and benefits of changes in tax regimes and documenting earnings management in response to tax incentives in a high book-tax-conform environment. Date: 2017 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:euract:v:26:y:2017:i:3:p:531-559 Ordering information: This journal article can be ordered from DOI: 10.1080/09638180.2016.1202854 Access Statistics for this article European Accounting Review is currently edited by Laurence van Lent More articles in European Accounting Review from Taylor & Francis Journals |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.