The Accounting Review Vol. 98 No. 3 2023
Are Book-Tax Differences Mispriced?
Abstract
I examine whether book-tax differences (BTDs) are mispriced. I predict that BTD mispricing is the operating cash flows-to-price (CFO/P) anomaly in disguise. Using both time-series asset pricing tests and cross-sectional returns tests, I provide consistent evidence that returns to trading on BTDs are explained by CFO/P. Rather than being an independent anomaly, the findings indicate that any evidence of BTD mispricing is subsumed by the broader CFO/P anomaly. These findings stand in contrast to many studies that infer BTDs possess unique information for future earnings reflected in stock prices with a delay.
- DOI
- 10.2308/tar-2020-0181
- Volume
- 98
- Issue
- 3
- Pages
- 285-306
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib