Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335057 
Year of Publication: 
2025
Citation: 
[Journal:] Journal of Business Economics [ISSN:] 1861-8928 [Volume:] 95 [Issue:] 8-9 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2025 [Pages:] 1107-1140
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
We examine the extent to which European listed firms use deferred tax accounting to manage their GAAP earnings in order to meet financial analysts’ earnings forecasts. The cross-country nature of our data allows us to compare the use of this earnings management channel across countries and to relate these differences to certain country characteristics, in particular country-specific features of the tax system. Our results clearly document that European listed firms use deferred tax assets to inflate earnings when pre-manipulated earnings fall below the average analyst forecast. On average, they increase their return on assets by 0.2 percentage points (or 3 percent) through this channel. Our results also show a large variation in this effect across countries. Firms that face larger deviations between tax and financial accounting, higher tax rates, a stricter tax enforcement and a more lenient tax loss offset may, to some extent, make greater use of this earnings management channel.
Subjects: 
Earnings management
Deferred tax accounting
Tax law
Tax strategy
JEL: 
H25
M41
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
Document Version: 
Published Version

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