Naslov
Book-Tax Differences and Companies’ Financial Characteristics: The Case of Croatia

Autori
Šodan, Slavko

Izvornik
The business review, Cambridge (1553-5827) 19 (2012), 2; 265-271

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
earnings quality; book-tax differences; financial reporting

Sažetak
The relation between income for tax and financial reporting purposes is a very complex topic. Book and tax income have different requirements and they serve different purposes. This study examines the sources of book-tax spread and investigates the book-tax difference as an indicator of earnings quality for companies listed on Croatian capital market. Main assumption of this research is that accounting standards often allow discretion in computation of income for financial reporting purpose while tax rules are generally stricter. Therefore, large book-tax gap can be indicator of managers’ opportunistic behavior and evidence of their earnings management activities that consequently reduce the quality of reported earnings. The research is conducted on the sample of Croatian listed companies for the period from 2000 to 2009. Obtained results from empirical analysis suggest that earnings quality measure is negatively related to absolute value of book-tax difference. Also, results indicate that company’s financial characteristics beside earnings quality, i.e. profitability, size, level of liquidity and sales growth explain significant percentage of the variation in book-tax spread across companies.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA