Impact of business strategies on tax avoidance of publicly listed companies (PLCs) in the Philippines: The moderating role of corporate governance

• Main Authors: Chua, Tyron Jasper Li, Cortez, Margarita Christalyn Maulion, Uy, Hans Mackenzie Dy
• Format: text
• Language: English
• Published: Animo Repository 2023
• Subjects: Tax planning—Philippines; Corporate governance—Philippines; Business Administration, Management, and Operations; Taxation
• Online Access: https://animorepository.dlsu.edu.ph/etdb_acc/68; https://animorepository.dlsu.edu.ph/context/etdb_acc/article/1127/viewcontent/Impact_of_business_strategies_on_tax_avoidance_of_publicly_listed.pdf
• Institution: De La Salle University

This study employed panel data regression analysis to determine the moderating effect of corporate governance on the relationship between business strategy and tax avoidance of Philippine PLCs from 2010 to 2019. Although tax avoidance is legal, it poses a risk to the government’s mandate to collect taxes as a motive power to operate. With this, there arises a need to understand the effect of the strategies employed by PLCs on their tax avoidance in order to guide the government. Likewise, the moderating role of corporate governance is examined to provide valuable insights to the management and investors of PLCs. A sample size of 627 firm years was employed. The firm years were classified as Defender, Prospector, and Analyzer based on the composite measure of business strategy. The study calculated the variables of the measure using a five-year rolling average. On the other hand, this study used Cash Effective Tax Rate (CETR) and Accounting Effective Tax Rate (AETR) as tax avoidance measures. The study also used board independence, board size, audit quality, and audit tenure to gauge corporate governance. The results of the study reveal that business strategy does not impact CETR but has a significant impact on AETR. Meanwhile, none of the corporate governance measures employed moderates the relationship between business strategy and CETR. However, board independence has a negative significant impact on the relationship between Prospector companies and their AETR. In contrast, board size and audit quality have a positive significant impact on the relationship between Defender companies and their AETR.