Credit Ratings and Taxes: The Effect of Book/Tax Differences on Ratings Changes

摘要: This paper examines whether credit analysts utilize the information contained in difference between book and taxable income analyzing a firm's risk. Increased book-tax differences may be informative for rating agencies as they signal decreased earnings quality or changes off-balance sheet financing. Results suggest significant negative association positive ratings changes. evidence is consistent with large signaling and/or increased We also find that result less favorable changes, these quality. In additional analyses, we attenuated high tax planning firms (e.g., where more likely reflect than quality).