The detection of earnings management through a decrease of corporate income tax

Future Business Journal

Table 2 Sample selection

	Observations
	Netherlands	Germany
Cash basis sample*
List of cash basis companies from 2002–2017	9	96
Less:
Companies with missing lagged market value of equity and	8	7
Companies with DataStream in only 1999 or 2004	12	10
Companies with missing earnings data for either year	4	5
Companies not on DS or with missing returns for either year	6	4
Companies that have no matching accrual basis companies in the same	7	6
Total cash basis sample—number of companies	54	64
Number of company-years available for the sample of 54 Dutch companies and 64 German companies for the years 2002–2006 and 2007–2009	200	200
Accrual basis sample
Company-years in the DataStream file matching four-digit industries as the cash sample with 2002 sales > $5 million, and observations in both years 2002 and 2004, for years 2000–2004 and 2006–2009	1350	1850
Less:
Company-years with missing earnings or return data	400	200
Less cash basis company observations	200	200
Total accrual basis sample—company-years (65 companies)	750	1450
Total sample cash and accrual company-year observations	950	1650

Source: Author work
*Cash basis sample includes the companies required to switch from the cash basis method of accounting for tax purposes to the accrual basis method following Guenther [25] and Moghadam et al. [26] provides evidence with companies deferring more financial accounting income as a result of the increase in book-tax conformity after this change