We examine the effects of the complexity of tax-related information on the issuance of analyst’s pre-tax income forecast and its value relevance. If analysts respond adequately to the needs of investors, they are more likely to provide a pre-tax income forecast. The provision of a pre-tax income forecast may indicate analysts’ confidence in assessing the quality of earnings. Thus, investors, in turn, would be more confident in the analysts’ pre-tax income forecasts if analysts provide both pre-tax and earnings forecasts than only the latter. Using a sample of Korean listed companies for 2005–2014, we find that analysts are likely to provide an implicit tax forecast when the volatility of the effective tax rate is low and the book-tax differences are small. We also find that when analysts provide pretax and after tax income forecasts, the value relevance for unexpected earnings increases. These results indicate that analysts are likely to be interested in corporate tax information and the complexity of tax-related information affects the availability of implicit tax forecasts. Furthermore, this study provides empirical evidence that when analysts provide both pre-tax and after tax income forecasts, investors have more confidence in analysts’ earnings forecasts, which results in greater investors’ responses.

Abstract
 1. Introduction
 2. Literature Review & Hypotheses
    2.1. Determination of corporate taxable in comein Korea
    2.2. Managing earnings using tax expenses and impact of pre-tax income forecasts
    2.3. Hypotheses
 3. Research Design
    3.1. Sample
    3.2. Methodology
 4. Empirical Results
    4.1. Summary Statistics
    4.2. Multivariate Test Results
 5. Conclusion
 References

• Kwang-Wuk OH(Korea University College of Global Business)
• Eun-Sun KI(Division of Business Administration and Accounting, Kangwon National University) Corresponding Author