Disclosure of Managers' Forecasts in Interim Financial Statements: A Study of Effective Tax Rate Changes
研究了中期财务报表中披露的年度有效税率管理层预测是否有助于预测未来季度盈余，以及分析师和投资者是否充分使用了这一信息。
This study examines whether managerial forecasts of annual effective tax rates, disclosed in interim financial statements, are useful in predicting future quarterly earnings, are incorporated in financial analysts' forecasts of quarterly earnings, or are impounded in stock prices. The integral view of interim financial reporting requires managers to make their best estimate of the effective income tax rate (ETR) to be in effect for the full fiscal year. Thus, the ETR reflected in interim financial statements represents the disclosure of certain private information regarding management's expectations for forthcoming earnings. Auditors review the income tax provision in conjunction with the release of interim financial statements, arguably lending credibility to management's ETR forecast. Our empirical analyses show that interim effective tax rate disclosures are useful in predicting next-quarter earnings. However, financial analysts generally under-utilize this information when firms report large decreases in ETR. Surprisingly, small ETR increases are related to higher future earnings, and a zeroinvestment strategy based on small ETR increases yields significant abnormal returns. In sum, although interim ETRs are useful in predicting future earnings, both financial analysts and stock market investors fail to fully impound the earnings implications of interim effective tax rate changes in their decisions.