Date of Completion


Embargo Period



Valuation of tax expense; variance decomposition; discount rate news.

Major Advisor

George Plesko

Associate Advisor

David Weber

Associate Advisor

Assaf Eisdorfer

Field of Study

Business Administration


Doctor of Philosophy

Open Access

Open Access


I investigate the information content of income tax expense using variance decomposition to separate stock returns into cash flow and discount rate news components. While prior literature has focused on linking tax expense with expected future cash flows, I provide arguments for why tax expense should also be informative about firm risk. Consistent with these arguments, my results indicate that the previously documented positive association between firm-level tax expense surprises and contemporaneous stock returns is driven in part by discount rate news. I then extend the firm-level analyses to the stock market level to determine whether tax is useful for market valuation and whether the firm-level discount rate news is idiosyncratic or systematic in nature. My results show that aggregate tax expense surprises contain information associated with increased macroeconomic risk. This result also suggests that the information in a firm’s tax expense surprise is reflective of priced idiosyncratic risk.