Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309909 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Business Economics [ISSN:] 1861-8928 [Volume:] 94 [Issue:] 1 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2023 [Pages:] 1-39
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
Subjects: 
Performance forecast
Out-of-sample tests
Deferred tax assets
Tax loss carryforwards
JEL: 
M40
M41
C53
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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