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Earnings manipulation: cost of capital versus tax

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Author Info

  • Aasmund Eilifsen
  • Kjell Henry Knivsfla
  • Frode Saettem

Abstract

We show that if taxable income were linked to accounting income, there will exist an automatic safeguard against manipulation of earnings within the analysed framework. Separating taxable income from accounting income will remove this self-controlled mechanism, and accordingly create a need for separate countermeasures to prevent earnings manipulation.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/096381899335899
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal European Accounting Review.

Volume (Year): 8 (1999)
Issue (Month): 3 ()
Pages: 481-491

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Handle: RePEc:taf:euract:v:8:y:1999:i:3:p:481-491

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Scholes, Myron S & Wilson, G Peter & Wolfson, Mark A, 1990. "Tax Planning, Regulatory Capital Planning, and Financial Reporting Strategy for Commercial Banks," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 625-50.
  2. Grinblatt, Mark & Hwang, Chuan Yang, 1989. " Signalling and the Pricing of New Issues," Journal of Finance, American Finance Association, vol. 44(2), pages 393-420, June.
  3. Chaney, Paul K. & Lewis, Craig M., 1995. "Earnings management and firm valuation under asymmetric information," Journal of Corporate Finance, Elsevier, vol. 1(3-4), pages 319-345, April.
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Cited by:
  1. Niclas Hellman, 1999. "Earnings manipulation: cost of capital versus tax. A commentary," European Accounting Review, Taylor & Francis Journals, vol. 8(3), pages 493-497.
  2. José António Moreira, 2006. "Are Financing Needs a Constraint to Earnings Management? Evidence for Private Portuguese Firms," CEF.UP Working Papers 0610, Universidade do Porto, Faculdade de Economia do Porto.
  3. Ch. Spathis & M. Doumpos & C. Zopounidis, 2002. "Detecting falsified financial statements: a comparative study using multicriteria analysis and multivariate statistical techniques," European Accounting Review, Taylor & Francis Journals, vol. 11(3), pages 509-535.
  4. Tak ISA, 2011. "Impacts and Losses Caused By the Fraudulent and Manipulated Financial Information on Economic Decisions," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(5), pages 929-939, December.
  5. Alexis Ngantchou, 2008. "Recentrage du cadre comptable, durcissement de l'environnement fiscal et persistance de la gestion des données comptables : Une étude du comportement des Petites et Moyennes Entreprises camerounaise," Post-Print halshs-00525819, HAL.

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