Tax Expense Momentum

Journal of Accounting ResearchVolume 49, Issue 3 p. 791-821 Tax Expense Momentum JACOB THOMAS, JACOB THOMAS Yale University School of Management. We thank Edward Li and K. Ramesh for sharing their database of 10-K/Q filing dates. We received many helpful comments and suggestions from anonymous referees, John Hand, Ed Maydew, Lil Mills, Jana Raedy, Doug Shackelford, Dave Weber, and seminar participants at AAA Annual Meetings (2007), Duke/UNC Fall Camp, Goldman Sachs, University of Minnesota, UNC Tax camp, UCLA, and Yale University. We also thank Thomson Financial Services, Inc. for the IBES data provided as part of a broad academic program to encourage earnings expectation research.Search for more papers by this authorFRANK X. ZHANG, FRANK X. ZHANG Yale University School of Management. We thank Edward Li and K. Ramesh for sharing their database of 10-K/Q filing dates. We received many helpful comments and suggestions from anonymous referees, John Hand, Ed Maydew, Lil Mills, Jana Raedy, Doug Shackelford, Dave Weber, and seminar participants at AAA Annual Meetings (2007), Duke/UNC Fall Camp, Goldman Sachs, University of Minnesota, UNC Tax camp, UCLA, and Yale University. We also thank Thomson Financial Services, Inc. for the IBES data provided as part of a broad academic program to encourage earnings expectation research.Search for more papers by this author JACOB THOMAS, JACOB THOMAS Yale University School of Management. We thank Edward Li and K. Ramesh for sharing their database of 10-K/Q filing dates. We received many helpful comments and suggestions from anonymous referees, John Hand, Ed Maydew, Lil Mills, Jana Raedy, Doug Shackelford, Dave Weber, and seminar participants at AAA Annual Meetings (2007), Duke/UNC Fall Camp, Goldman Sachs, University of Minnesota, UNC Tax camp, UCLA, and Yale University. We also thank Thomson Financial Services, Inc. for the IBES data provided as part of a broad academic program to encourage earnings expectation research.Search for more papers by this authorFRANK X. ZHANG, FRANK X. ZHANG Yale University School of Management. We thank Edward Li and K. Ramesh for sharing their database of 10-K/Q filing dates. We received many helpful comments and suggestions from anonymous referees, John Hand, Ed Maydew, Lil Mills, Jana Raedy, Doug Shackelford, Dave Weber, and seminar participants at AAA Annual Meetings (2007), Duke/UNC Fall Camp, Goldman Sachs, University of Minnesota, UNC Tax camp, UCLA, and Yale University. We also thank Thomson Financial Services, Inc. for the IBES data provided as part of a broad academic program to encourage earnings expectation research.Search for more papers by this author First published: 01 February 2011 https://doi.org/10.1111/j.1475-679X.2011.00409.xCitations: 70Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat ABSTRACT We investigate the joint hypothesis that (1) tax expense contains information about core profitability that is incremental to reported earnings and (2) that information is reflected in stock prices with a delay. We find that seasonally differenced quarterly tax expense, our proxy for tax expense surprise, is related positively to future returns. This anomaly is separate from previously documented pricing anomalies based on financial and tax variables. Additional investigation reveals that tax expense surprise is related positively to changes in future quarterly earnings and tax expense, and both those future changes are related positively to future returns. While the returns to investing in predictable future earnings changes has been documented before, these results suggest that predicting changes in future tax expense also generates incremental future returns. Citing Literature Volume49, Issue3June 2011Pages 791-821 RelatedInformation