Grace Lee investigates firm risk relationship to taxable income

Assistant Professor Hye Seung (Grace) Lee recently co-authored an article titled “Taxable Income and Firm Risk,” which will be included in the Journal of American Taxation Association, published by the American Taxation Association Section of the American Accounting Association.

The article offers estimated taxable income as an alternative summary measure of a firm’s financial and operating performance, in particular examining whether it provides incremental information about firms’ operating risk.

Lee concludes that taxable income-based measures explain variability of future pre-tax financial performance as well as market-based measures of firm risk. These findings can improve the field’s understanding of how market participants employ a summary measure of firm performance and are relevant to the debate regarding the unintended consequences of conforming book income and taxable income.