Financial Decisions, Tax Effect and Investment Performance

Financial Decisions, Tax Effect and Investment Performance

KADERLI, Yasemin Coskum
BEKCIOGLU, Selim

The aim of the study is to measure influence of taxation while making financial decisions and predict it with the general application in Turkey. Except for equity returns of financial and negative capital institutions registered in Bursa Istanbul between 2000 and 2012, those of all other businesses were calculated. In order to measure cost of capital, Capital Assets Pricing Model (CAPM) was employed. Businesses were divided into four regions as stated in Tax Incentive Law according to the study. As stated in Tax Incentive Law, the businesses whose costs of capital were divided into six regions where statistical analysis was made to determine whether taxation influenced financial decisions of the related businesses based on Tax Incentive Law or not. Assessment of the findings within the study determined that businesses in 1st, 2nd and 3rd regions were affected by taxation 5,69, 2,75 and 1,39 as means between 2007 and 2012, respectively. Accordingly taxation load of businesses in 1st region provinces was found to be heavier than those of businesses in other regions. Considering the Tax Incentive Law, it was found to be statistically important that taxation load of the related region should be taken into account in making any financial decisions. In this respect, there is an impact of tax when one makes financial decisions. However, other relevant factors should also be considered. Keywords: Financial Decision, the Kinds of Financial Decisions, Tax, Tax Incentive Law, Bursa Istanbul. Variables are transformed and necessary post-selection adjustments will be done. Data and results are checked using Shapiro-Wilk W test for normality, Kernel density estimation, Cameron & Trivedi’s decomposition of IM-test and Breusch-Pagan / Cook-Weisberg test for heteroscedasticity, Variance Inflation Factor for multicollinearity, the model specification link test for single-equation models, and the regression specification error test for omitted variables. Relevant conclusions are drawn based on Spearman and regression analysis. Obtained results show that firms with more net trade credit are more profitable. Firms with higher portion of current assets are bigger firms and invest more in inventory than counterparties. Bigger firms have more inventory than smaller firms. Firms with higher leverage ratios are less able to convert sales into cash. Net trade credit is negatively significant associated with inventory to assets ratio, leverage ratio, and net cash flows from operating activities to sales. Net trade credit is positively significant associated with current assets to total assets ratio. Profitability is found statistically significant determinant, but with beta and standard error equal zero. Results show that net trade credit ratio on average is slightly small, but positive. A positive net trade credit indicates that on average trade receivables are higher than trade payables. With other words, analyzed firms for the analyzed period have sell more than have bought on credit. Keywords: net trade credit, accounts receivable, accounts payable, financial ratios, regression.

Article
PeerReviewed

ISSN 2303-4564

International Burch University

2014-04

2544