The Role of Temporary Differences of Book Value and Tax-Based Earnings To Explain Earnings Persistence

Annas Cahyadi


The purpose of this study is to examine how temporary differences
of book value and taxes-based earnings explain earnings persistence.
First, this study examines and showsthat temporary differences provide additional
information on earnings persistence.The study then examines two
potential causes of differencesofbook value and tax-based earnings, namely
earnings management and tax planning.This study concludes that firms suspected
of performing earnings management and having the differences in
book value and tax-based earnings, their earnings will be less persistent than
other firms. On the other hand, for firms suspected of performing tax
planning,their earnings will be more persistent. This study also examines the
more dominant factor that causes differences of earnings forfirms in Indonesia
and found that the differences are more influenced by tax planning
practices rather than earnings management.


differences inbook value and tax-based earnings; earnings persistence; earnings management; tax planning


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