Sabrina Chi, an assistant professor of accounting at Cal State Fullerton’s College of Business and Economics, examines mandatory and voluntary corporate tax disclosures in her study “A Tale of Two Forecasts: An Analysis of Mandatory and Voluntary Effective Tax Rate Forecasts,” which was co-authored by accounting faculty at UC Irvine and the University of Houston and will appear in the prestigious top tier A⁺ ranked journal The Accounting Review, the flagship journal of The American Accounting Association. Chi also presented this paper to the Securities and Exchange Commission (SEC) Office of Chief Accountant. Analysts at Credit Suisse Group AG discussed institutional details with Chi in preparation for the study.

Using management issuing both mandatory and voluntary ETR forecast as the setting, Chi finds that if mandatory disclosure is noisy – industry jargon for when mandatory disclosures are volatile and not precise – managers voluntarily provide additional, usually helpful, information to analysts. This voluntary information is then more informative than the information that was required.

However, when mandatory disclosures are precise or when voluntary disclosure is also based on US generally accepted accounting principles (GAAP), Chi’s research finds that the usefulness of mandatory and voluntary disclosure is not different to analysts.

Chi’s study is the first known study in which both mandatory and voluntary disclosures use the same metric – management annual ETR forecasts.

CSUF College of Business and Economics faculty consistently publish in high-ranking journals, while also bringing real-world application of their studies to the classroom.

From preparing the next generation of accounting professionals for an AI-driven future to the latest tax trends, the School of Accountancy at the College of Business and Economics is a leader in both research and teaching. For more on the school, read our articles on accounting education and research.