The effect of Tax Governance on the cost of capital of Brazilian companies

• Autor(a) principal: Moreira, Caritsa Scartaty
• Data de Publicação: 2019
• Outros Autores: Silva, Maurício Correa
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: Revista Científica Hermes
• Texto Completo: https://revistahermes.com.br/index.php/hermes1/article/view/433
• topic: Tax Governance; ETR and CashETR; Cost of Own Capital.; governança tributária; ETR e CashETR; custo de capital próprio

The Brazilian stock market is constantly growing, however, there are conflicts of interest between the principal and the agent regarding the management of the funds invested, which in turn give rise to the agency problem. Thus, the relationship between this scenario of conflicts and the complexity and obscurity of the Brazilian tax system is directly related to the investor as he seeks the highest possible return on his investments. Thus, good tax governance practices to reduce the tax burden on companies' profits may be a strategy that companies can use to reduce the minimum rate of return demanded by shareholders. Thus, this research sought to analyze the effect of Tax Governance on the cost of equity of Brazilian companies listed in B3. The final sample resulted in a balanced panel composed of 300 observations, whose analysis comprised 60 companies in the period from 2012 to 2016. The data analyzed were extracted from Bloomberg® and the Reference Form available on the website Brazil, Bolsa e Balcão (B3). The methodology used was pooled multiple regression. The results suggest that good tax governance practices influence, statistically and positively, the cost of capital of Brazilian companies, that is to say, as there is no reduction of the cash flows from the payment of taxes, investors increase the rate of expected return on investments. In conclusion, the change in the cost of equity of companies can be explained by the adoption of tax governance.