Abstract

This study can detect earnings management through the BTD, analyze how different information effects of accounting and tax earnings on the size of the BTD that can be used as a substitute for quality of earnings based on preceding studies. In foreign studies, there are two conflicting empirical results. One is the larger BTC(or the smaller BTD) the smaller the information contents of accounting earnings, and another one is companies with low BTD compared to high BTD represent the information effect on accounting and tax earnings. On the other hand, in our capital markets analyze how different information effect of accounting and tax earnings on the size of the BTD, examine explanation of stock prices with an increase BTD. The sample of this paper includes companies listed in Korean stock market. These samples in this analysis were extracted from the time between 2008 and 2014 year. As a result of analysis, the following findings are obtained： Interaction variables on accounting earnings and BTD were showed statistically significant negative, but interaction variables on tax earnings and BTD were appered statistically significant positive. This phenomenon means the larger BTD the smaller the information contents of accounting earnings, but increase the information contents of tax earnings. This result setting up model of taking into account both accounting and tax earnings didn't change much. Also to compare accounting earnings and stock price, organize various size of the BTD portfolio and 30 percent higher absolute value of the BTD. In case of not taking into account BTD size, appered highly explanation of stock prices on accounting earnings. Whereas on the large BTD group, showed highly explanation of stock prices on tax earnings. Comparing to advanced research, this study have discrimination and improvement that analyze how different information effect of accounting and tax earnings on the size of the BTD, also examine explanation of stock prices with an increase BTD.

Keywords

• earnings management
• information effects
• accounting earnings
• tax earnings

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