However, the relative contribution of estimated taxable income decreases to the extent that
firms engage in aggressive tax planning. Fourth, firms with large book-tax differences (low values of the TI/BI ratio) have lower P/E ratios, presumably due to the association between the TI/BI ratio and future earnings growth. However, sample limitations make it unclear whether this result is generalizable. Fifth, unexpected taxable income (estimated by grossing up financial statement tax expense) and the ratio of taxable income to book income predict future returns, a finding that Weber (2009) attributes to the failure of analysts to properly use the information in estimated taxable income.