This study investigates how sophisticated market participants use tax-based information by examining whether analysts' street effective tax rates (ETRs) are informative. When assessing firm performance, analysts exclude items they believe do not reflect current performance, resulting in “street” metrics such as street ETR. However, evidence on the properties of the components of street earnings is limited. Examining the informativeness of street ETRs is important because taxes are a significant component of earnings, and the extent to which analysts understand taxes and incorporate them into their analyses is not clear. Using a hand-collected sample of analyst reports, we find that while approximately 35% of street ETRs have at least one tax-specific exclusion, over 90% reflect the tax effects of pre-tax exclusions. Further, both tax-specific exclusions and the tax effects of pre-tax exclusions significantly contribute to differences between GAAP and street ETRs. Consistent with analysts' understanding of the implications of tax and nontax exclusions, our results suggest that street tax metrics exhibit greater predictive ability about future tax outcomes and provide more information to investors than GAAP tax metrics. We also find that ETR exclusions are of higher quality when the magnitude of the potentially excluded item is greater and when managers disclose pro forma earnings. Collectively, our findings suggest that analysts understand taxes, but selectively exert effort to incorporate tax-based information into their assessment of firm performance. Our study should be informative to regulators and users of financial information because it provides evidence regarding the usefulness of street earnings metrics.

中文翻译：

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Street 与 GAAP：哪个有效税率提供更多信息？*

本研究通过检查分析师的街道有效税率 (ETR) 是否提供信息，来调查成熟的市场参与者如何使用基于税收的信息。在评估公司业绩时，分析师会排除他们认为不能反映当前业绩的项目，从而产生“街道”指标，例如街道 ETR。然而，关于街头收入组成部分属性的证据是有限的。检查街道 ETR 的信息量很重要，因为税收是收益的重要组成部分，而分析师对税收的了解程度并将其纳入分析的程度尚不清楚。使用手动收集的分析师报告样本，我们发现虽然大约 35% 的街道 ETR 至少有一项特定税收排除，但超过 90% 反映了税前排除的税收影响。更多，特定税收排除和税前排除的税收影响都显着导致 GAAP 和街道 ETR 之间的差异。与分析师对税收和非税收排除的影响的理解一致，我们的结果表明，与 GAAP 税收指标相比，街头税收指标对未来税收结果具有更强的预测能力，并为投资者提供更多信息。我们还发现，当潜在排除项目的规模更大并且经理披露备考收益时，ETR 排除的质量更高。总的来说，我们的研究结果表明，分析师了解税收，但有选择地努力将基于税收的信息纳入他们对公司业绩的评估中。