Last chance for a big bath: managing deferred taxes under IAS 12 in Brazilian listed firms

ABSTRACT This study investigates whether Brazilian loss-making firms manage deferred income tax as a form of big bath strategy. "Big bath” is a strategy in which a firm manages earnings by intentionally recording large non-recurring losses. We found original evidence supporting the hypothesis of big bath through the managing of deferred taxes under CPC 32/IAS 12. Deferred tax expenses can be used as a tool for reducing earnings because of the subjectivity and timing involved. To analyze the excess of deferred taxes, we propose a particular research strategy that is based on the increased homogeneity of accounting standards and tax regulation in Brazilian listed firms. This analysis provides new evidence of big bath adjustments that was never described before in the literature. We analyze 226 Brazilian listed firms for the 2011-2015 period. We designed a linear model to estimate deferred tax excess that is based on the conditional independence between treatment and effect under accounting standard CPC32/IAS 12. For our baseline analysis, we used least squares with controlling covariates. We also used two-stage least squares to control for omitted variables bias. This paper finds evidence that Brazilian firms can manage deferred income tax as a form of big bath. Results indicate that loss-making firms disclose significantly higher excesses of net deferred tax expenses, and that these excesses increase with losses.

摘要 本研究旨在探究巴西亏损企业是否会将递延所得税作为洗大澡策略的一种手段。“洗大澡”指企业通过刻意确认大额非经常性损失来操纵盈余的一种策略。本文基于巴西会计准则第32号（CPC 32）/国际会计准则第12号（IAS 12）下的递延所得税处理，找到了支持洗大澡假说的原创性证据。由于递延所得税费用涉及主观判断与时点选择，其可被用作调节盈余的工具。为分析递延所得税超额水平，本文提出了一种基于巴西上市公司会计准则与税收规制趋同程度提升的特定研究策略。该分析为现有文献尚未记载的洗大澡调整行为提供了全新证据。本文选取2011-2015年间的226家巴西上市公司作为研究样本。本文基于CPC 32/IAS 12会计准则下处理与效应的条件独立性假设，构建了用于估计递延所得税超额的线性模型。基准回归分析中，本文采用控制协变量的最小二乘法进行估计。同时，本文采用两阶段最小二乘法以控制遗漏变量偏差。本文的研究结果表明，巴西上市公司可将递延所得税作为洗大澡的手段。结果显示，亏损企业报告的净递延所得税费用超额水平显著更高，且该超额水平随亏损规模扩大而提升。