BOOK-TAX DIFFERENCES AND CAPITAL STRUCTURE

• Published in: RAM. Revista de Administração Mackenzie 2017-12, Vol.18 (6), p.177-200
• Main Authors: Marques, Mariana Titoto, Nakao, Silvio Hiroshi, Costa, Patricia De Souza
• Format: Article
• Language: eng ; spa
• Subjects: Accounting; Asymmetry; book-tax differences; Capital structure; Conformity; debt level; Disclosure; equity cost; Fair value; Financial statements; ifrs adoption; indebtedness; Information management; International Financial Reporting Standards; Investments; Public companies; Taxable income
• ISSN: 1518-6776; 1678-6971; 1678-6971
• DOI: 10.1590/1678-69712017/administracao.v18n6p177-200

Purpose: Thus, the purpose of this study is to verify the relationship between BTD, indebtedness and the cost of capital of Brazilian public companies before and after the adoption of IFRS. Originality/value: The relation between book-tax differences (BTD) and accounting information quality is not a consensus in the literature. This relation can be empirically observed by means of the structure and the cost of capital, due to the related information asymmetry. However, a way to observe this relation more clearly is by means of changes and various economic environments. Design/methodology/approach: The methodology involved panel data analysis from a sample of 1,079 observations for the period of 2005 to 2015. Findings: The results lead to the conclusion that a higher BTD, and thus, lower book-tax conformity, represents higher accounting information quality because lower indebtedness is related to lower informational asymmetry. The results suggest that creditors and investors have different demands for reported information quality and that the volume of capital from investors is more relevant than the level of risk perceived by them. KEYWORDS Book-tax differences. Debt level. IFRS adoption. Indebtedness. Equity cost.