Document Type
Article
Publication Date
3-2020
Abstract
We contribute to the research on the information content of earnings as it applies to the forecasting of economic activity across reporting models. We examine whether publicly available financial statement information is incrementally useful in forecasting confidentially reported taxable income. More precise firm-level taxable income forecasts can improve policymakers’ modeling of the tax system and their ability to analyze the effect of proposed changes in corporate tax law. When aggregated, improved micro-forecasts can also yield more accurate macro-forecasts of corporate taxable income, a significant component of the federal budget. We find that financial statement information improves firm-level estimates of future taxable income by providing more timely information. We also document the usefulness of the deferred tax valuation allowance in improving taxable income estimates for loss firms. Our evidence suggests public financial statement information complements proprietary data to improve estimates of future taxable income for budgetary and policy use.
DOI
10.2139/ssrn.3532559
Recommended Citation
Green, D. H., Henry, E. E., Parsons, S. M., & Plesko, G. A. (2020). Incorporating financial statement information to improve forecasts of corporate taxable income. SSRN Electronic Journal. Doi: 10.2139/ssrn.3532559
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
JEL Classifications: M41, M48, H25