We examine whether the narrative discussion in financial disclosures can help corporate stakeholders better predict tax outcomes. To measure qualitative discussion, we map the thematic content of 10-K disclosures estimated with topic modeling analysis to the tax planning determinants framework of Wilde & Wilson (2018). We find that framework-mapped qualitative discussion in financial disclosures can substantially improve prediction of tax outcomes in in- and out-of-sample tests. We further find that prediction-relevant discussion is distributed throughout the 10-K, supporting that disclosures should be analyzed holistically rather than examining only certain pieces of larger disclosures, and that analysts struggle to use this information effectively. These findings empirically illustrate the wealth of qualitative information in 10-K disclosures for stakeholders concerned about tax outcomes and offer a novel approach to examining qualitative disclosures and predicting tax outcomes.
Antonio De Vito will be present its publication.
The seminar will be held in English.
Major information: Matteo Merlo (matteo.merlo2@unibo.it).