Abstract
Over past few years, the global financial crisis shows certain influence on emerging financial markets including Viet nam. Therefore, this study chooses an analytical approach to give some systematic opinions on how much some certain determinants such as income tax and leverage, affect the level of market risk in listed tourism companies.First, it calculates equity and asset beta values in three different scenarios of changing tax rates and changing the level of financial leverage. Second, under 3 different scenarios of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in equity beta values, estimated at 0,753 for current leverage situation.Third, by changing tax rates in 3 scenarios (25%, 20% and 28%), we recognized both equity and asset beta mean values have positive relationship with the increasing level of tax rate.Last but not least, this paper covers some ideas and policy suggestions.
Highlights
After financial crisis and reactions in financial industry taking place recently, we find out that there are signals of impacts of tax rates and the level of financial leverage on the fluctuations of market risk, measured by both equity and asset beta values
Preliminary Notes 2.1 Research Issues This research aims to figure out two issues: Issue 1: What happen to asset beta if both FL and tax rate change in 3 scenarios Issue 2: What happen to equity beta if both FL and tax rate change in 3 scenarios 2.2 Literature Review John (1999) mentions a two-rate tax system where land is taxed at a higher rate than structures in his research on two-rate property tax effects on land development
In the scenario 1, current tax rate is kept as 25% as in the 2011 financial statements which is used to calculate market risk while leverage degree is kept as current, changed from 30% up to 20% down
Summary
After financial crisis and reactions in financial industry taking place recently, we find out that there are signals of impacts of tax rates and the level of financial leverage on the fluctuations of market risk, measured by both equity and asset beta values This leads to a question on using external debt of management team in a hope that the business market value can be recovered. As our previous series of paper, Research literature, issues, methodology and theories are covered in the first two sessions. It followed by introduction of our empirical findings in session 3 (3rd). There are exhibit session which covers some calculated results of this paper’s analysis and comparison
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