Book-Tax conformity and earnings management in Brazil

• Autor(a) principal: Martinez, Antonio Lopo
• Data de Publicação: 2019
• Outros Autores: Leal, Lennilton Viana
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: RACE (Joaçaba. Online)
• Texto Completo: https://periodicos.unoesc.edu.br/race/article/view/18854
• topic: Book-Tax conformity; Earnings management; Discretionary accruals; Conformidade contábil-fiscal; Gerenciamento de resultados; Accruals discricionários

This study aimed to examine whether higher Book-Tax conformity restricts earnings management in public companies, non-financial corporations, listed in B3 in the period from 2010 to 2016. Book-Tax conformity measures the degree of compliance of the corporate accounting and those of tax accounting. Methodologically, three regression models were used, in which the first two models aim to provide, respectively, the degree of Book-Tax conformity and discretionary accruals, which will be used in the third model, which is the main focus of analysis, which investigates the association between Book-Tax conformity and earnings management. The results showed that the lower the Book-Tax conformity, the higher the propensity to manage results. Also, it was identified that smaller companies with lower profitability tend to manage their accounting results more. The findings indicate that accounting practices that reduce the conformity of corporate accounting rules with those of tax accounting encourage increased earnings management. On the other hand, in those companies with higher book-tax compliance, there is a lower propensity to manage accounting results. The degree of Book-Tax conformity becomes, therefore, a determinant element to understand the economic incentives to earnings management in Brazil. Given the above conclusions, this research is of significant interest to regulators, professionals, and users of accounting, who can identify possible effects on the quality of accounting information from lower Book-Tax conformity.