Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173201
Authors: 
Dreher, Sandra
Eichfelder, Sebastian
Noth, Felix
Year of Publication: 
2017
Series/Report no.: 
IWH Discussion Papers 30/2017
Abstract: 
We analyse the relevance of losses, accounting information on tax loss carryforwards, and deferred taxes for the prediction of earnings and cash flows up to four years ahead. We use a unique hand-collected panel of German listed firms encompassing detailed information on tax loss carryforwards and deferred taxes from the tax footnote. Our out-of-sample predictions show that considering accounting information on tax loss carryforwards and deferred taxes does not enhance the accuracy of performance forecasts and can even worsen performance predictions. We find that common forecasting approaches that treat positive and negative performances equally or that use a dummy variable for negative performance can lead to biased performance forecasts, and we provide a simple empirical specification to account for that issue.
Subjects: 
performance forecast
in-sample prediction
out-of-sample prediction
loss persistence
deferred taxes
tax loss carryforwards
JEL: 
C53
M40
M41
Document Type: 
Working Paper

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