Study of Effective Corporate Tax Rate and Its Influential Factors: Empirical Evidence from Emerging European Markets

• Published in: Emerging markets finance & trade Vol. 54; no. 3; pp. 571 - 590
• Main Authors: Vintilă, Georgeta, Gherghina, Ştefan Cristian, Păunescu, Radu Alin
• Format: Journal Article
• Language: English
• Published: Abingdon Routledge 01-01-2018; Taylor & Francis, Ltd; Taylor & Francis Ltd
• Subjects: Corporate taxes; effective corporate tax rate; firm characteristics; Longitudinal studies; panel data models; Political power; Tax rates
• ISSN: 1540-496X; 1558-0938
• DOI: 10.1080/1540496X.2017.1418317

This article examines the driving factors of the effective corporate tax rate (ECTR) for a sample of companies listed on five Eastern European stock exchanges (Romania, Hungary, Poland, Bulgaria, and Slovenia), covering the period 2000-2016. The empirical research covers variables regarding firm characteristics (e.g., profitability, efficiency of assets, indebtedness, liquidity, and solvency), firm-level controls, auditing fees, and the statutory rate. The estimated panel data models provide support for a positive link between the ECTR and profitability, debt, capital and inventory intensity, firm size, and statutory rate, strengthening the validity of political cost theory. Further, the negative link between market capitalization and assets growth supports the idea of political power theory.