Relationship between tax avoidance and institutional ownership over business cost of debt

Figures & data

Table 1. Summary of research variables

Variable code	Type of variable	Definition	Measurement
COD	Dependent	Cost of debt	Interest expenses divided by business total debt
BTD	Independent	Book-tax difference	The difference between reporting revenue and the implied revenue derived from the tax payable and the corresponding tax rate
TA	Independent	Total accrual	As mentioned in Desai and Dharmapala (2009) study to measure tax avoidance on accruals, based on the argument that tax savings may come from other purposes of income management and tax avoidance.
INST	Independent	Institutional ownership	The percentage of share held by large financial organizations
AGE	Control	Business age	Study year—business founded year
LEVERAGE	Control	Leverage ratio	Total liabilities divided by total assets
CFO	Control	Cash from operations	Total cash receipts from operating activities divided by total assets
SIZE	Control	Size of business	Logarithm of total assets

Table 2. Summary of expected correlation of the variables

Variables	Expected correlation with dependent variable	Previous studies
BTD	-	Bhojraj and Sengupta (2003), Graham and Tucker (2005), Desai and Dharmapala (2009)
TA	-	Bhojraj and Sengupta (2003), Graham and Tucker (2005), Desai and Dharmapala (2004)
INST	-	Ashbaugh-Skaife et al. (2006), Bhojraj and Sengupta (2003), Desai and Dharmapala (2004)
AGE	-	Lim (2009)
LEVERAGE	+	Petersen and Rajan (1994)
CFO	+	Lim (2009)
SIZE	-	Carey et al. (1993)

Table 3. Summary of tax rates in Vietnam for the research period

Effective date	Business affected	Tax rate	Source
Before 1 July 2013	All businesses unless specifically excluded.	25%	Circular 123/2012/TT-BTC issued 2012,
	Businesses in oil and gas prospecting, exploration, and exploitation in Vietnam.	32%–50%
	Businesses in searching, exploring, and exploiting rare and precious mineral resources, except oil and gas.	50%
	Business in rare and precious resource industry with 70% or more of allocated mines in economically disadvantaged areas.	40%
From 7 January 2013, to 31 December 2013	Businesses established under Vietnamese law with annual turnover not exceeding VND 20 billion.	20%	Circular 121/2013/TT-BTC issued 2013,
	Businesses with annual turnover exceeding VND 20 billion.	25%
	Businesses established after 1 July 2013 (except for those eligible for tax incentives)	25%
From 1 January 2014, to 31 December 2015	Businesses established under Vietnamese law, including with annual turnover not exceeding VND 20 billion.	20%	Circular 78/2014/TT-BTC, issued 2014,
	Businesses with annual turnover exceeding VND 20 billion.	22%
Since 1 January 2016	All businesses except for those eligible for tax incentives.	20%	Circular 96/2015/TT-BTC, issued 2015,

Table 4. Descriptive statistics for variables in the model (N = 1,863)

Variable	Unit of measurement	Mean	Maximum	Minimum	Standard deviation
COD	%	0.054	2.649	0.065	0.084
BTD	Bill. VND	265.649	6,608.416	−31.608	682.707
TA	Bill. VND	28.838	27,860	−36,162	2243.765
INST	%	0.241	30.372	0	0.732
AGE	Year	26.299	89	8	13.757
LEVERAGE	%	48.1	97.0	0.1	0.228
CFO	Times	0.064	1.038	−0.798	0.141
SIZE	Logarithm	27.774	34.545	20.215	1.586

Explanation for these variables is at section 3.1 of this paper.

Table 5. Variance inflation factor

Variable	VIF	1/VIF
SIZE	2.30	0.434
BTD	1.95	0.513
LEVERAGE	1.39	0.719
CFO	1.12	0.889
TA	1.03	0.968
AGE	1.03	0.969
INST	1.00	0.995
Mean VIF	1.40

Table 6. Correlation matrix

	BTD	TA	INST	AGE	LEVERAGE	CFO	SIZE
BTD	1.000
TA	−0.069	1.000
INST	0.037	−0.027	1.000
AGE	0.126	−0.051	−0.002	1.000
LEVERAGE	0.243	−0.077	0.025	0.072	1.000
CFO	0.030	−0.117	0.031	0.045	−0.271	1.000
SIZE	0.679	−0.087	0.048	0.039	0.467	−0.116	1.000

Table 7. Breusch and Pagan Lagrangian multiplier test for random effects

	Var	sd = sqrt(Var)
cod	0.007	0.084
e	0.005	0.073
u	0.001	0.038
Test: Var(u) = 0 chibar2(01) = 327.44 Prob > chibar2 = 0.0000

Table 8. Hausman test

Test: Ho: difference in coefficients not systematic

chi2(4) = (b-B)’ [(V_b-V_B) ^ (−1)] (b-B)

= 6.49

Prob>chi2 = 0.165

Table 9. Modified Wald test for groupwise heteroskedasticity in fixed effect regression model

H0: sigma(i)^2 = sigma^2 for all i

chi2 (207) = 5.7e+08

Prob>chi2 = 0.000

Table 10. Regression results of the FGLS method

Variables	Coeff.	Std. Error	P>|z|	[95% Conf. Interval]
BTD	0.000	0.000	0.791	−0.000	0.000
INST	0.000	0.002	0.850	−0.004	0.005
TA	0.000	0.000	0.755	−0.000	0.000
AGE	0.000	0.000	0.783	−0.000	0.000
LEVERAGE	−0.002	0.017	0.889	−0.037	0.032
CFO	0.014	0.014	0.321	−0.013	0.041
SIZE	−0.006	0.003	0.092	−0.013	0.000
Cons	0.217	0.095	0.023	0.029	0.405

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