Security Analyst And Stock Market Efficiency

917 Words Apr 21st, 2016 4 Pages
Security Analyst and Stock Market Efficiency in Anticipating Tax-Motivated Income Shifting
& Investments in Tax Planning
The main research question is to understand the cost that many firms face when they are implementing tax planning ideas. Tax planning requires many considerations, but mainly the high costs and risks associated with the tax plan. If these costs can be understood, then they may possibly be mitigated in the future through thorough research and extensive planning. The author wants to know how well are market participants are able to anticipate tax-motivated income shifts. The author states prior studies and research resulted in firms expecting tax rate reductions while others did not. Furthermore, when the tax rate reductions were large, firms responded to the incentives to alter income.
The authors main results came from the prior research issues about firms having a strong incentive to shift their income from the fourth quarter to the following first quarters of lower tax rate years. However, the researched discovered the same firms had little to no incentive to adjust income between the second and third quarters of the same fiscal year. One implication of the finding in the study came from a breakdown in the analysts and investors to break apart the income from various causes from corporations, using tax-motivated income shifts. The shifts can be from poor performance because a poor strategy or bad execution of managing earnings to lower tax payments.…
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