This thesis examines how book-tax conformity affects the value relevance of earnings and different components of earnings across countries. Since the primary objective of tax rules is different from the goal of financial reporting, accounting information is less likely to reflect underlying economic events in countries with strong links between tax and financial accounting. Using a binary variable of book-tax conformity developed by prior research, I find evidence that changes in earnings are less value relevant in countries with high book-tax conformity than in countries with low book-tax conformity.; By measuring the value relevance of earnings components using the coefficients and explanatory powers in return-earnings component regressions for twenty-two countries, I investigate whether the value relevance of the changes in sales, cost of goods sold, depreciation, tax expenses, and other earnings components are associated with book-tax conformity across countries.; Consistent with the hypotheses, empirical analysis reveals that sales and depreciation components, measured by regression coefficients, are more value relevant in countries with low book-tax conformity. The results show that tax components are more value relevant in countries with low book-tax conformity, the opposite of the prediction. However, I find no evidence to support the hypothesis that the value relevance of cost of goods sold and other components is higher in countries with low book-tax conformity.; When the value relevance of earnings components is measured by explanatory powers of regression models, I find that sales, depreciations, and tax components are valued more in countries with weak book-tax alignment, which is consistent with the results from coefficients of regression models.
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