Working papers

"Do Analysts Improve on Managers’ Voluntary ETR Forecasts?" (Dissertation) [SSRN]
This study examines whether analysts improve on managers’ voluntary annual effective tax rate (ETR) forecasts. Managers' voluntary ETR forecasts are the second most common forecast information provided, but we know little about how analysts use this information. I find approximately 33 percent of analyst ETR forecasts materially deviate from management’s ETR forecast (i.e., more than half a percentage point). I also find (1) analysts’ after-tax, pretax, and ETR forecasts are less accurate when deviating from managers’ ETR forecasts, even when controlling for analyst characteristics; (2) less experienced analysts deviate more often than more experienced analysts; and (3) investors do not differentiate between analyst forecasts that deviate versus forecasts that follow managers’ ETR forecasts, suggesting investors do not find incremental information in these forecasts. Overall, my results indicate that analysts can be overconfident about their private information and underweight management information.

"Nonrecurring Income Taxes" with Dain Donelson and Lillian Mills [SSRN]
We examine whether analysts and investors identify and adjust for nonrecurring income taxes and the role of manager-provided non-GAAP earnings in this process. We find analysts frequently exclude nonrecurring income taxes in calculating Street earnings and investors largely ignore them, consistent with analysts and investors adjusting for nonrecurring income taxes. However, analysts appear to follow managers’ non-GAAP exclusion choices with respect to nonrecurring income taxes – mimicking both inclusions and exclusions. These results should be of interest to Street earnings users, especially as nonrecurring income taxes become increasingly frequent and material.