open access

https://hdl.handle.net/2115/82463

Analysis of the impact of tax burden on corporate value

税收负担对企业价值的影响分析

日本語

2021-08

北海道大学大学院経済学研究院

Discussion Paper, Series B

195

1-28

The purpose of this study is to clarify the influence that tax burden ratio gives to corporate value using data of Japan's multinational corporations in 2016.The most important finding is to interpret the result of increase of corporate value influenced by decrease of ETR and BTD3 that is indicated by (Chart 7). In most empirical researches in the tax accounting field, decrease of ETR may be interpreted to indicate the trend of the tax avoidance, however this study doesn’t adhere to conventional approaches.The strong negative relationship between BTD3 and corporate value indicates that corporate profits are high but taxable income is low. Investors will be negative about the situation, and the rate of return will decline.Hanlon [2005, p.163] points out that investors perceive it as dangerous when large positive BTDs occur, that is, when accounting profits are much higher than taxable income. The results of this study also support his findings. On the other hand, the strong negative relationship between ETR and corporate value indicates that a decrease in the tax burden rate pushes up corporate value and raises the rate of return.It is generally interpreted that a decrease in ETR is welcomed because it is a decrease in tax burden, but our interpretation is different. A decline in ETR is also a phenomenon that occurs when corporate income exceeds corporate profits due to tax adjustments due to excessive depreciation or omission of earnings records. At this time, the ETR decreases because the subtraction temporary difference will occur in the future. At the same time, BTD3 may show a negative value because corporate income that exceeds corporate profits is calculated.Looking at it in this way, it is true that the tax effect has reduced tax costs, but it does not mean that the tax burden has decreased. Rather, the tax burden is increasing, as evidenced by the negative BTD3. However, if there is a permanent difference in tax effect accounting, the ETR may not decrease. If you have non-deductible costs such as reserves, entertainment and social costs, and donations, BTD3 will certainly approach zero and may be negative. However, at that time, the ETR does not decrease.Therefore, from the results of this study, investor support is gained when BTD3 decreases and ETR3 also decreases. I will mention the last remaining issue. Although we acknowledged the fact that the tax burden rate affects corporate value, we believe that the actual difference in tax burden rate between companies does not originate from the behavior of management. Rather, I think it comes from the tax incentive system that corresponds to the type of business and business environment. Therefore, it may be necessary to consider a finer company classification than to analyze the data by classifying it into manufacturing and non-manufacturing industries as we tried in this study.

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