Open AccessEquity liquidity and tax aggressiveness in the Brazilian capital market
Author(s) -
Bernardo Fernandes Lott Prímola,
Eduardo Mendes Nascimento,
Octávio Valente Campos
Publication year - 2021
Publication title -
revista catarinense da ciência contábil
Language(s) - English
Resource type - Journals
eISSN - 2237-7662
pISSN - 1808-3781
DOI - 10.16930/2237-7662202131882
Subject(s) - market liquidity , business , monetary economics , proxy (statistics) , equity (law) , capital market , economics , financial system , finance , machine learning , computer science , law , political science
This study has investigated the potential relationship between equity liquidity and tax aggressiveness in the Brazilian capital market. Using a database of publicly traded Brazilian companies from 2010 to 2019 – not including the year 2020 due to the atypical effects of the COVID-19 pandemic – panel data models have been developed, the goal synthesis of which consisted in evaluating the longitudinal effects of equity liquidity, independent variable, on the book tax difference, dependent variable, and proxy of tax aggressiveness. Results have shown a statistically significant and economically positive relationship between the tax aggressiveness proxy and stockholding liquidity. Results suggests that companies with less volatile stocks, with larger relative stocks in B3 [(in full, B3 – Brasil Bolsa Balcão S.A.), formerly BMFBOVESPA, a stock exchange located at São Paulo, Brazil] businesses and lower trading costs tend to adopt a more aggressive tax planning. This article helps to demonstrate that in an emerging capital market such as the Brazilian one investor tend to belittle occasional increases in profits sparingly through more aggressive tax practices, however, which may result in future losses. Furthermore, this study helps to demonstrate the importance of disclosures about tax planning so that market agents can properly price financial assets.