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Foreign Capital Participation and Tax Aggressiveness in Brazilian Companies

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  • Antonio Lopo Martinez

    (University of Coimbra, Portugal)

  • Clébio Bis

    (Fucape Business School, Brazil)

Abstract

This study explores the relationship between tax aggressiveness and foreign capital participation in Brazilian companies listed on the BM & F BOVESPA from 2010 to 2015, using the concept of tax aggressiveness as a reduction of taxable income through tax management and planning (Chen et al., 2010). Observing that previous studies show a significant relationship between tax aggressiveness and ownership structures, this research seeks to understand whether this relationship is significant if there is foreign capital participation in the company. The sample was composed of Brazilian companies listed on the BM&F BOVESPA. Two metrics of tax aggressiveness were used to investigate this relationship: effective tax rate (ETR) and book-tax difference (BTD). The use of these metrics was inspired in a review on tax research by Hanlon and Heitzman (2010), who concluded that ETR and BTD could capture the reduction of taxable income through tax planning. The results showed no significant relationship between foreign capital participation and tax aggressiveness, demonstrating that the origin of equity capital is not a factor of tax aggressiveness.

Suggested Citation

  • Antonio Lopo Martinez & Clébio Bis, 2020. "Foreign Capital Participation and Tax Aggressiveness in Brazilian Companies," European Journal of Studies in Management and Business, EUROKD, vol. 15, pages 43-53.
    • Handle: RePEc:bco:mbrqaa::v:15:y:2020:p:43-53
    DOI: 10.32038/mbrq.2020.15.04
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    References listed on IDEAS

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    1. Kong-Pin Chen & C.Y. Cyrus Chu, 2005. "Internal Control vs. External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 151-164, Winter.
    2. Sonja Olhoft Rego & Ryan Wilson, 2012. "Equity Risk Incentives and Corporate Tax Aggressiveness," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 50(3), pages 775-810, June.
    3. Kong-Pin & C.Y. Cyrus Chu, 2005. "Internal Control versus External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 151-164, Spring.
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