재무보고이익-세무보고이익의 차이와 이익, 현금흐름 및 발생액의 지속성과 자본시장의 반응

We investigate the implications of book-tax differences for the persistence of current earnings, cash flows, and accruals for next-period earnings. Applying the Mishkin (1983) methodology, we also examine whether the level of book-tax differences influences investors’ assessments of earnings persistence. This study extends Hanlon (2005) in two major ways. First, it decomposes accruals into current and non-current accruals, and analyzes the persistence and market pricing of these two accrual components. Second, our study reduces measurement errors for temporary book-tax differences by using footnote information on deferred tax expense.Based on the level of temporary differences, we partitioned firms listed on the Korea Stock Exchange during the 1999-2003 period into three sub-samples. The LPBTD (LNBTD) sample is comprised of firm-years in the highest (lowest) quintile of all firms. The SMBTD sample includes the remaining firm-years.We find that the LPBTD sample has lower persistence, in both cash flow and accruals, than the SMBTD sample. This result suggests that the lower earnings persistence in the LPBTD sample is due not only to earnings management in the accrual process but also to other factors. As for the LNBTD sample, the persistence of its accruals and cash flow is not statistically different from that of the SMBTD sample. Investors appear to overestimate the persistence of accruals in both the full sample and the SMBTD sample. In the LNBTD sample and the LPBTD sample, however, investors correctly assess the persistence of earnings components. Overall, our results suggest that footnote information on book-tax differences aids investors’ assessment of the persistence of earnings and its components.