Book-Tax Conformity and Earnings Persistence: Influences of Earnings Management and Tax Aggressiveness
DOI:
https://doi.org/10.22561/cvr.v35i3.8443Keywords:
Book-tax conformity, Earnings persistence, Discritionary practicesAbstract
The present study aims to analyze the moderating effect of earnings management (EM) and tax aggressiveness (TAG) of companies on the relationship between Book-Tax Conformity (BTC) an earnings persistence. To achieve this objective, the investigation seeks to understand how average levels of EM and TAG may impact the association between BTC and earnings persistence. The study employed the multiple regression technique, utilizing a dataset comprising non-financial companies across 35 countries during the period from 2010 to 2020. The empirical results elucidate that the beneficial effects stemming from book-tax conformity on earnings persistence are exclusively accentuated in environments characterized by diminished levels of EM and TAG. Furthermore, given that tax aggressiveness contributes positively to earnings persistence, such benefits manifest exclusively within contexts featuring lower BTC. These findings lead to the conclusion that, in environments marked by heightened tax aggressiveness, superior-quality accounting information is attainable in circumstances characterized by reduced BTC. Conversely, potential enhancements in accounting information quality within a high BTC environment remain unrealized if such an environment fosters discretionary earnings management practices. These results furnish novel empirical insights into the relationship between BTC and earnings persistence in environments characterized by varying degrees of discretionary practices.
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