TY  - JOUR
AU  - Cummins,Jason G.
AU  - Harris,Trevor S.
AU  - Hassett,Kevin A.
TI  - Accounting Standards, Information Flow, and Firm Investment Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4685
PY  - 1994
Y2  - March 1994
UR  - http://www.nber.org/papers/w4685
L1  - http://www.nber.org/papers/w4685.pdf
N1  - Author contact info:
Jason Cummins
Brevan Howard Asset Management
Suite 250
1776 Eye Street, NW
Washington, DC 20006
Tel: 202-835-6401
E-Mail: jason.cummins@brevanhoward.com

Trevor Harris

Kevin Hassett
American Enterprise Institute
1150 Seventeenth Street, N.W.
Washington, DC 20036
E-Mail: khassett@aei.org
M1  - published as Jason Cummins, Trevor Harris, Kevin Hassett. "Accounting Standards, Information Flow, and Firm Investment Behavior," in Martin Feldstein, James R. Hines Jr., R. Glenn Hubbard, "The Effects of Taxation on Multinational Corporations" University of Chicago Press (1995)

AB  - We present a description of two different accounting regimes that govern reporting practice in most developed countries.  'One-book' countries, e.g. Germany, use their tax books as the basis for financial reporting and 'two-book' countries, e.g. the United States, keep the books largely separate.  We derive a structural model and formalize a testable implication of our discussion: firms in one-book countries may be reluctant to claim some tax benefits if reductions in taxable income may be misinterpreted by financial market participants as signals of lower profitability.  Econometric estimates suggest that accounting regime differences play an important role in describing domestic investment patterns both within and across countries.
ER  -