| This dissertation investigates the economic consequences of the FASB's Accounting for Income Taxes. First, it explores abnormal stock price changes in response to the FASB's pronouncements for income tax allocations. Next, using a two stage non-linear estimation, it examines the economic determinants of the accounting choices of firms, as represented by their lobbying positions, and the influences of stock market reactions and corporate governance.; The results show that the market reacted more to the final release of the FASB's proposal for income tax allocation in 1991, than to the release of the exposure draft for SFAS No. 96. In the analysis of the economic determinants of accounting choices for income tax allocation, the stock market reaction and the firm's corporate governance influenced the firm's decisions. Specifically, as the stock market reacted negatively to the changes in accounting for income taxes in 1986 and 1991, firms chose to lobby against the rules. The results also show that these firms were less likely to lobby when outsiders controlled the board of directors.; This dissertation theorizes the structural relation between stock market reaction and firms' accounting choices, and demonstrates that stock market reactions are a useful summary measure of economic incentives in accounting choices. |
