Earnings management and the corporate alternative minimum tax

Article Abstract:

The impact of the alternative minimum tax (AMT) provision of the Tax Reform Act of 1986 on management of earnings in 1986 and 1987 was examined in 414 US firms. The provision included book or reported income as part of the corporate AMT for corporations that did not pay a minimum level of regular tax, with 20% imposed on alternative minimum taxable income and an effective marginal rate of 10% on AMT book exposure. Results showed that firms used unusual income-decreasing discretionary accruals to reduce their 1987 income which is subject to AMT. This was especially true for smaller firms that were not able to reduce their AMT exposure through net operating losses and foreign tax credits. However, results did not indicate manipulations of 1986 earnings in anticipation of the 1987 AMT.

Usage, Taxation, Economic aspects, Profits, Minimum tax, Accrual basis accounting, Corporate profits

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Do insiders manipulate earnings when they sell their shares in an initial public offering?

Article Abstract:

R&D investment decisions are examined as the means by which selling shareholders might influence the initial public offering (IPO) offer price. Results found that for a sample of 243 IPOs from the year 1986 to 1990, change in R&D spending in the year of the IPO is negatively related to managerial selling.

United States, Research and Development in the Physical, Engineering, and Life Sciences, Financial management, Scientific Research and Development Services, Commercial physical research, Research & Development-Industry, Science, Research & Development, Company investment, Investments, Research and development, Industrial research, Going public (Securities), Initial public offerings, Company public offering

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