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Value Relevance Of Book And Tax Income: A Macroeconomic Conditions Perspective

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  • Mingjun Zhou

Abstract

This paper tests how macroeconomic conditions affect the value relevance of book and tax income. Based on regression coefficient estimates, more than 8% in the value relevance of book income is dependent on the interaction with a proxy for the macroeconomy. For a possible policy change where tax rules have a greater influence on financial accounting, the erosion of earnings quality will be more pronounced during economic expansion than contraction. Under such policy change, investors may lose additional information for them to price earnings based on stages of the economy.

Suggested Citation

  • Mingjun Zhou, 2012. "Value Relevance Of Book And Tax Income: A Macroeconomic Conditions Perspective," Accounting & Taxation, The Institute for Business and Finance Research, vol. 4(2), pages 1-12.
    • Handle: RePEc:ibf:acttax:v:4:y:2012:i:2:p:1-12
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    References listed on IDEAS

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    More about this item

    Keywords

    book income; tax income; book-tax conformity; earnings quality; macroeconomic conditions;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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