Financial Accounting Consequences of Temporary Tax Law: Evidence from the R&D Tax Credit.

Temporary Tax Laws;Public Finance;Financial Accounting;Economics;Business;Business Administration

Hoopes, Jeffrey LamroSlemrod, Joel B. ;

University of Michigan

关键词: Temporary Tax Laws;    Public Finance;    Financial Accounting;    Economics;    Business;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/102375/jhoopes_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

This paper investigates the extent to which extensions of a temporary tax law reduce market participants’ ability to predict and understand corporate earnings. Examining evidence from eight separate extensions of the R&D tax credit, I find that market participants adjust their expectations for corporate earnings upwards in response to extensions of the R&D tax credit, but doing so incrementally decreases the accuracy of earnings forecasts. The evidence also suggests that abnormal bid-ask spreads around quarterly earnings announcements increase for firms affected by an expired R&D tax credit, suggesting that trading costs rise when markets have difficulty interpreting earnings affected by the expired R&D tax credit. The results of this study call attention to previously unexplored costs of temporary tax laws—capital market confusion related to corporate earnings affected by expired tax laws.