Correlation Of Book-tax Differences And Earnings Management

Academic-circles believe that there are three reasons for the formation of book-tax differences:Institutional factors, Earnings management, Corporate income tax. Accounting profit shall be in accordance with accounting standards. Taxable income is calculated according to tax. After several accounting standard reforms, China gradually to international convergence, which must be cause the separation of accounting and taxation. However, China has been using the appropriate separation of accounting and tax, there are other reasons for the accounting and tax over-separation phenomenon. The academia believes that earnings management is an important factor. Management adjusts the accounting profit, taking into account the cost of the attendant income tax. According to the theory of rational economic man, the management is likely to use non-taxable items to the earnings management. That is not all earnings management will lead to the increase of taxable income. Avoidance consideration of earnings management is likely to be an important factor of the impact of Book-tax differences in the amount of size.In this paper an empirical analysis of financial data of the A-share listed companies. Using regression analysis to isolate:abnormal Book-tax differences and handling accruals. Have a correlation analysis of the differences and accruals. Study the actual tax rate of its impact. The study found a positive correlation:Book-tax differences and earnings management. The greater the magnitude of earnings management, the difference in amount is the greater. The empirical analysis also found that the higher the effective tax-rate of listed companies, the greater the motivation to avoid income tax by non-taxable income items. This further illustrates, avoidance of earnings management consideration is an important factor affecting the Book-tax differences in the amount of size.