Dr. Erin Henry recently accepted for publication in Contemporary Accounting Research
For release: November 30, 2017
Dr. Erin Henry, assistant professor of Accountancy, recently had her dissertation accepted for publication in Contemporary Accounting Research. The paper is entitled, "The Information Content of Tax Expense: A Discount Rate Explanation."
This paper investigates the information content of income tax expense using variance decomposition to separate stock returns into cash flow and discount rate news. While prior literature has focused on linking tax expense with expected future cash flows, the author argues that tax expense should also be informative about discount rates because of its ability to summarize fundamental economic performance. Consistent with the arguments, the author finds that tax expense surprises are correlated with both revisions in future cash flows and revisions in discount rates; however, the economic magnitude of tax expense's impact on returns is primarily through the discount rate channel. The author also performs cross-sectional tests which reveal that the discount rate implications of tax expense are due not only to its ability to capture fundamental economic performance but also due to its ability to convey information about a firm's earnings management and tax avoidance activities.
"We are pleased to have Dr. Henry as a new member of our faculty in the School of Accountancy," said Dr. Kenton Walker, chair of the School of Accountancy. "Her publication is a testament to the excellence that we strive for at FCBE."