ANALYSIS OF THE RELATIONSHIP BETWEEN THE COMPONENTS OF BOOKTAX DIFFERENCES AND ANNUAL VARIATIONS IN EARNINGS AND TAX EXPENSES OF FIRMS LISTED ON THE BMF&BOVESPA

Resumo

The objective of this article is to analyze if there is a relationship between the components of temporary and permanent book-tax differences (BTDs) with the annual variations of earnings before income tax (EBIT) and income tax expenses (INCTAX), respectively, and the possible influence of earnings management on these relations. The study is based on a sample of 130 companies with shares listed for trading on the BMF&Bovespa between 2004 and 2011. To investigate the relationship of the independent variables (components of temporary and permanent BTDs) and the dependent variables (annual variations in earnings before income tax and income tax expenses), we created models according to the method of Jackson (2011), segregating BTDs into permanent and temporary and analyzing the relations for 1, 3, 5 and 7 years ahead. In this context, we tried to identify the relationship between temporary BTDs and annual variations in EBIT and that between permanent BTDs and the annual variation of INCTAX, with or without the influence of earnings management. To indicate the existence of earnings management, we used the method developed by DeFond and Park (2001), which captures abnormal working capital, used as a proxy for earnings management here. The results demonstrate there is no influence of earnings management on the relationship of BTDs with annual variations in EBIT and INCTAX. However, the signs of the variables in the models indicate a negative relation between temporary BTDs with variation in EBIT and a positive relation between permanent BTDs with income tax expenses for all the years analyzed.