Abstract
A model is developed to study managerial strategies vis-à-vis choice of accounting alternatives and earnings reports where the manager is better informed than the market about firm prospects. How corporate taxation affects these strategies is a focal aspect of this study. In the information equilibrium identified, managers of firms with higher future cash flows choose income-increasing accounting alternatives and report higher earnings in spite of the potential corporate tax consequences. The optimal earnings reports are shown to involve some intertemporal smoothing. The announcement effects and the comparative statics properties derived provide a rich menu of testable implications.
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