Abstract
The Impact on Corporate Financial Leverage of the Relationship Between Tax Avoidance and Institutional Ownership: A Study of Listed Firms in Vietnam
Highlights
Tax avoidance is the legal use of rules in the current tax regime to reduce the tax liability
Tax avoidance is considered a legal approach for businesses to take in availing themselves of credit that will enable them to reduce borrowing, this is consistent with Myers and Majluf’s pecking order theory (1984)
We focus on answering the following question: How does tax avoidance and institutional ownership affect the financial leverage of Vietnamese businesses? To be more specific, these two aspects are at core of the paper: (1) How does tax avoidance and institutional ownership affect the financial leverage of businesses? (2) How can businesses take advantage of tax avoidance and institutional ownership to influence their financial leverage, contributing to the adjustment of debt policy in accordance with performance targets? The study sample consists of Vietnamese enterprises listed on the Ho Chi Minh Stock Exchange (HOSE) in the period 2008-2016
Summary
Tax avoidance is the legal use of rules in the current tax regime to reduce the tax liability. An increase in institutional ownership is believed to boost the quality of corporate governance, thereby limiting the correlation between these two factors (Desai and Dharmapala, 2004) This initially shows the impact of the correlation between tax avoidance and institutional ownership on business borrowing and solvency. We focus on answering the following question: How does tax avoidance and institutional ownership affect the financial leverage of Vietnamese businesses? These two aspects are at core of the paper: (1) How does tax avoidance and institutional ownership affect the financial leverage of businesses? (2) How can businesses take advantage of tax avoidance and institutional ownership to influence their financial leverage, contributing to the adjustment of debt policy in accordance with performance targets? The paper uses secondary data from the financial statements of 207 businesses, totaling 1,863 observations
Published Version
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