IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i2p1839-1855.html
   My bibliography  Save this article

Effect of Tax Rate Cut on Financial Performance of Electronic Firms

Author

Listed:
  • Challoner A. Matero

    (Accountancy Department, University of San, Carlos University, School of, Business and Economics, Republic of the Philippines)

  • Hsien-Li Lee

    (Department of Accounting, Chung Yuan, Christian University, College of Business, Republic of China)

Abstract

This study assesses the effect of tax rate cut on the financial performance of Taiwanese-listed firms using data from 2009 to 2012. This study hypothesizes that income tax rate cuts affect financial performance using selected financial ratios as indicators. This study finds that the hypotheses on the Debt-Equity Ratio, Return on Equity, and Return on Invested Capital are supported. However, there is no support for the hypothesis on the Current Ratio, Price-Earnings Ratio, Equity Ratio, and Operating Profit Margin. Using a pooled sample, the capital structure tends to adjust resulting in lower debt and, accordingly, higher equity. In particular, the electronic group reacts differently with a significant and negative relationship between debt-equity ratio and tax, moreover, it finds lower production and wages relevant..

Suggested Citation

  • Challoner A. Matero & Hsien-Li Lee, 2024. "Effect of Tax Rate Cut on Financial Performance of Electronic Firms," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(2), pages 1839-1855, February.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:2:p:1839-1855
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-2/1839-1855.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/journals/ijriss/articles/effect-of-tax-rate-cut-on-financial-performance-of-electronic-firms/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Heider, Florian & Ljungqvist, Alexander, 2015. "As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes," Journal of Financial Economics, Elsevier, vol. 118(3), pages 684-712.
    2. Shaojin Li & Toni M. Whited & Yufeng Wu, 2016. "Collateral, Taxes, and Leverage," The Review of Financial Studies, Society for Financial Studies, vol. 29(6), pages 1453-1500.
    3. Roger D. Huang & Cheng‐Yi Shiu, 2009. "Local Effects of Foreign Ownership in an Emerging Financial Market: Evidence from Qualified Foreign Institutional Investors in Taiwan," Financial Management, Financial Management Association International, vol. 38(3), pages 567-602, September.
    4. Laura Dobbins & Martin Jacob, 2016. "Do corporate tax cuts increase investments?," Accounting and Business Research, Taylor & Francis Journals, vol. 46(7), pages 731-759, November.
    5. Nadeem Ahmed Sheikh & Muhammad Azeem Qureshi, 2014. "Crowding-out or shying-away: impact of corporate income tax on capital structure choice of firms in Pakistan," Applied Financial Economics, Taylor & Francis Journals, vol. 24(19), pages 1249-1260, October.
    6. Lin, Chihuang H. & Shiu, Cheng-Yi, 2003. "Foreign ownership in the Taiwan stock market--an empirical analysis," Journal of Multinational Financial Management, Elsevier, vol. 13(1), pages 19-41, February.
    7. Haga, Jesper & Höglund, Henrik & Sundvik, Dennis, 2019. "Cost behavior around corporate tax rate cuts," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 34(C), pages 1-11.
    8. Lueg, Rainer & Punda, Pawel & Burkert, Michael, 2014. "Does transition to IFRS substantially affect key financial ratios in shareholder-oriented common law regimes? Evidence from the UK," Advances in accounting, Elsevier, vol. 30(1), pages 241-250.
    9. Alan J. Auerbach, 2018. "Measuring the Effects of Corporate Tax Cuts," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 97-120, Fall.
    10. Cyrille Schwellnus & Jens Matthias Arnold, 2008. "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-Country Evidence from the Amadeus Dataset," OECD Economics Department Working Papers 641, OECD Publishing.
    11. Anna‐Maija Lantto & Petri Sahlström, 2009. "Impact of International Financial Reporting Standard adoption on key financial ratios," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(2), pages 341-361, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Challoner A. Matero & Hsien-Li Lee, 2024. "Effect of International Financial Reporting Standards on Firm Performance and Components of Leverage," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(1), pages 1206-1216, January.
    2. Zhao, Hong & Shen, Hao & Wang, Haizhi & Zhu, Yun, 2024. "State corporate tax changes and bond pricing: U.S. evidence," International Review of Financial Analysis, Elsevier, vol. 92(C).
    3. Peter Vaz da Fonseca & Michele Nascimento Juca & Wilson Toshiro Nakamura, 2020. "Debt Tax Benefits in a High Tax Emerging Market: Evidence from Brazil," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 35-52.
    4. Karuppiah Sankarganesh & K. Rangasamy Shanmugam, 2023. "Effect of corporate income tax on investment decisions of Indian manufacturing firms," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 28(1), pages 156-175, January.
    5. Brian Clark, 2022. "Valuing the speed of adjustment of capital structure," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(4), pages 855-879, December.
    6. Peter Vaz da Fonseca & Andrea Decourt Savelli & Michele Nascimento Juca, 2020. "A Systematic Review of the Influence of Taxation on Corporate Capital Structure," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 155-178.
    7. Gerda Dewit & Dermot Leahy & Chris Jones & Yama Temouri, 2017. "Does Tax Haven FDI Influence Firm Performance?," Economics Department Working Paper Series n284-17.pdf, Department of Economics, National University of Ireland - Maynooth.
    8. Klasa, Sandy & Ortiz-Molina, Hernán & Serfling, Matthew & Srinivasan, Shweta, 2018. "Protection of trade secrets and capital structure decisions," Journal of Financial Economics, Elsevier, vol. 128(2), pages 266-286.
    9. Lien, Donald & Hung, Pi-Hsia & Chen, Hung-Ju, 2021. "Who knows more and makes more? A perspective of order submission decisions across investor types," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 381-398.
    10. Donald Lien & Pi-Hsia Hung & Chiu-Ting Pan, 2020. "Price limit changes, order decisions, and stock price movements: an empirical analysis of the Taiwan Stock Exchange," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 239-268, July.
    11. Zou, Liping & Tang, Tiantian & Li, Xiaoming, 2016. "The stock preferences of domestic versus foreign investors: Evidence from Qualified Foreign Institutional Investors (QFIIs) in China," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 12-28.
    12. Dai, Yanke & Du, Ting & Gao, Huasheng & Gu, Yan & Wang, Yongqin, 2024. "Patent pledgeability, trade secrecy, and corporate patenting," Journal of Corporate Finance, Elsevier, vol. 85(C).
    13. Li, Bing & Liu, Chang & Sun, Stephen Teng, 2021. "Do corporate income tax cuts decrease labor share? Regression discontinuity evidence from China," Journal of Development Economics, Elsevier, vol. 150(C).
    14. Deng, Kebin & Zhu, Yushu & Smith, Tom & McCrystal, Alan, 2020. "Tax and leverage: Evidence from China," China Economic Review, Elsevier, vol. 62(C).
    15. Kai Chang & Ning Lu & Ze Sheng Li & Yi Ran Wang, 2021. "The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1822-1835, October.
    16. Lampenius, Niklas & Shevlin, Terry & Stenzel, Arthur, 2021. "Measuring corporate tax rate and tax base avoidance of U.S. Domestic and U.S. multinational firms," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    17. Lien, Donald & Hung, Pi-Hsia & Lo, Hsiang-Yu, 2022. "Order Choices: An Intraday Analysis of the Taiwan Stock Exchange," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    18. Duc Nam Phung & Anil V. Mishra, 2016. "Ownership Structure and Firm Performance: Evidence from Vietnamese Listed Firms," Australian Economic Papers, Wiley Blackwell, vol. 55(1), pages 63-98, March.
    19. Wafaa Salah, 2020. "The International Financial Reporting Standards and Firm Performance: A Systematic Review," Applied Finance and Accounting, Redfame publishing, vol. 6(2), pages 1-10, August.
    20. Sylvain Catherine & Thomas Chaney & Zongbo Huang & David Sraer & David Thesmar, 2022. "Quantifying Reduced‐Form Evidence on Collateral Constraints," Journal of Finance, American Finance Association, vol. 77(4), pages 2143-2181, August.

    More about this item

    Statistics

    Access and download statistics

    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:bcp:journl:v:8:y:2024:i:2:p:1839-1855. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.