An Econometric Approach Regarding the Impact of Fiscal Pressure on Equilibrium: Evidence from Electricity, Gas and Oil Companies Listed on the New York Stock Exchange

Larissa Batrancea

doi:10.3390/math9060630

Abstract

The matter of fiscal pressure is more current than ever in most countries around the world for various reasons. In the first place, disruptive phenomena such as financial crises put tremendous pressure on worldwide economies. Secondly, high taxes trigger an overall reduction in the level of investments aiming at creating stable and well-paid jobs. Thirdly, the income generated by the majority of taxpayers is subject to excessive taxation, which may fuel tax evasion acts. On these grounds, the article is the first empirical research investigating the impact of fiscal pressure on the financial equilibrium of energy companies listed on the New York Stock Exchange. The sample included 88 electricity, gas, and oil companies from around the world, which were analyzed over a time span of 16 years, including the periods before, during, and after the 2008 global financial crisis. The methodology entailed estimating econometric models via Panel Least Squares (cross-section weights) with and without time fixed effects. Empirical results showed that fiscal pressure had a stronger impact on the short-term and long-term equilibrium of electricity and oil companies than on the equilibrium of gas companies. The study can serve as a compass for the managers of energy companies interested in estimating the evolution of company equilibrium state when considering other potential financial downturns.

Highlights

Exploring the impact of fiscal pressure is a timely topic especially because of the excessively increasing national debt levels during the last decade, after the 2008 global financial crisis [1,2,3]
I estimated the relationships between fiscal pressure indicators and indicators reflecting the state of equilibrium of a company on the short and long run of companies operating in the energy industry
The measures central oftendency were for allofvariables interest: current ratio (CR); quick ratio (QR); debtcomto equity puted for all variables of interest: current liquidity ratio (CR); quick ratio (QR); ratio (D/E); fiscal pressure to gross margin ratio (RPGM); fiscal pressure to debt equitytoratio (RPEQ); fiscal pressure sales ratio (RPS); fiscal pressurefiscal to expenses ratioto (RPE)

Summary

Introduction

Exploring the impact of fiscal pressure is a timely topic especially because of the excessively increasing national debt levels during the last decade, after the 2008 global financial crisis [1,2,3]. The effects of such an increase have been negatively perceived on international financial markets by both individual and corporate taxpayers. High levels of fiscal pressure can discourage corporate taxpayers from investing into new production capacities [4], hiring staff from the people available on the labor market, increasing production levels, and contributing to public budgets. The 2008 global financial crisis, the intricacy of tax behavior scrutinized by various economic and behavioral models [5], the complexity of tax systems across different countries and the negative externalities posed by phenomena such as shadow economy and corruption [6], the dynamics of the relationship between tax authorities and taxpayers [7], and the impact of taxes on economic growth are important factors that have contributed to the implementation of the aforementioned tax reforms

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Conclusion