A Study on the Relevance between Book－Tax Difference and Earnings Information

This paper is to investigate the future earnings for the KOSPI. By using more recent historical data financial data in Korean, we focuses on the manufacturing industry in Korea based on the precedent researches conducted. This paper analyses the findings of prior researches concerning the book－tax difference(below BTD) and earnings information and ascertains if our result are similar to those results when recent financial data was used in our study. This paper estimates two separate components of book－tax difference(BTD). Then this study partitions the sample into two subsample, namely large temporary book－tax differences(BTD) and large permanent book－tax differences(BTD) to establish regression models. Result follows as；there is a negative association between large permanent book－tax difference(BTD) and income tax expenses. This finding is consistent with Jackson(2009). Moreover, this study found the negative relationship between large temporary book－tax difference(BTD) and pre－tax earnings. Finally EPS is also affected by the changes in the temporary book－tax difference. The following contributions are expected：this finding delivers the further evidence to verify previous inferences that the relationship between book－tax difference(BTD), and earnings information can still be considered a very worthwhile topic to revisit. Secondly, this study utilizes the most recent data to build more robust tests of information in book－tax difference(BTD) for earnings information.