Author
Listed:
- Suzan Sameer Issa
(Faculty of Administrative & Financial Sciences, University of Petra, Amman, Jordan)
- Adel Ahmed
(Amity Business School, Amity University Dubai,Dubai International Academic City, United Arab Emirates)
- Mosab I. Tabash
(College of Business, Al Ain University, Al Ain, United Arab Emirates)
- Md. Rehan Khan
(STS, Minto Circle, Aligarh Muslim University, Aligarh – U.P., India)
- Zilola Shamansurova
(Department of Finance and Financial Technologies, Tashkent State University of Economics, Uzbekistan)
- Umar Farooq
(School of Economics and Finance, Xi’an Jiaotong University, Xi’an, Shaanxi, P. R. China)
Abstract
[Objective] This research examines how a country’s culture affects a company’s decisions regarding financing and corporate tax rates. [Design/methodology/approach] We used a two-step system called the Generalized Method of Moment (GMM) to analyze data from five major Asian economies (China, India, Pakistan, South Korea, and Singapore) from 2010 to 2019. [Findings] Our findings suggest a positive correlation between corporate tax rates and debt financing. Increased corporate taxes lead to high tax deduction value, incentivizing firms to enhance their debt financing after-tax income. Furthermore, corporations in a more tax environment prefer leverage financing to exploit the tax deductibility of interest payments. However, this relationship can become negative due to the influence of national culture. In economies with a low power distance culture and less information asymmetry, managers prefer equity financing to debt financing. Reliability, moral sympathy, and trust can attract investors, shareholders, and other stakeholders’ attention in these cultures. Similarly, in cultures with low uncertainty avoidance, people are less risk-averse and prefer equity financing to debt financing. [Implications] Corporate managers should consider national culture when deciding on financing patterns, especially when dealing with high corporate tax rates. [Novelty] This research stands out due to its novel approach of integrating national cultural factors as moderating variables in analyzing corporate tax rates and financing patterns. Unlike previous studies, this research provides a holistic perspective that underscores the importance of cultural context in financial decision-making processes, thereby offering new insights and practical implications for corporate managers and policymakers aiming to optimize financial strategies in culturally diverse settings. This study is pertinent to decision sciences as it delves into corporate managers’ intricate decision-making processes influenced by taxation regimes and cultural dynamics. By clarifying the moderating role of national culture on corporate financial strategies, this research provides valuable insights into the strategic considerations that underpin corporate finance decisions in diverse economic and cultural contexts.
Suggested Citation
Suzan Sameer Issa & Adel Ahmed & Mosab I. Tabash & Md. Rehan Khan & Zilola Shamansurova & Umar Farooq, 2024.
"Examining the Interplay between Tax Systems and Corporate Finance across Diverse Asian Economies,"
Advances in Decision Sciences, Asia University, Taiwan, vol. 28(3), pages 1-24, September.
Handle:
RePEc:aag:wpaper:v:28:y:2024:i:3:p:1-24
Download full text from publisher
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aag:wpaper:v:28:y:2024:i:3:p:1-24. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vincent Pan (email available below). General contact details of provider: https://edirc.repec.org/data/dfasitw.html .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.