Abstract
PurposeThis paper focused on financial constraints scenario and tax planning activities of banks in Ghana. The study explores how financial constraints could motivate the banks to pursue tax planning mechanism and the implication on tax revenue mobilisation.Design/methodology/approachThe paper followed generalised method of moments and fixed effect estimators to investigate the financial constrained-tax planning activity nexus. Simulation approach is adopted to provide financially constrained bank scenario. Besides contemporaneous analysis, sensitivity analysis is conducted to determine time varying effect. Data from all the 20 commercial banks which have operated from 2008 to 2018 were used.FindingsThe paper found that when banks are faced with financial constraints, they exhibit lower cash-effective-tax-rate. The decomposition analysis also revealed that financially constrained banks are likely to take on both short- and long-term tax planning opportunities. The paper also found evidence of persistence in the tax planning activities under financial constrained scenario.Originality/valueThis paper is one of the few studies which have extended the tax planning literature to the Ghanaian banking sector. Further novelty is seen from the development of financial constraint scenario from liquidity and solvency. Liquidity and solvency are the anchors for continuity of banking operation and sensitive to regulatory watch and sanctions. Therefore, by applying simulation approach to trigger financial constraints scenarios from these fundamental indicators reveals the extent to which commercial banks rely on tax planning opportunities to mitigate the consequence of financial constraints.
Subject
General Environmental Science
Reference98 articles.
1. Corporate tax avoidance incentives of banks in Ghana;Journal of African Business,2019
2. Financial constraints and firm tax evasion;International Tax and Public Finance,2019
3. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy;The Journal of Finance,1968
4. Tax compliance among small and medium scale enterprises in Kumasi metropolis, Ghana;Journal of Economics and Sustainable Development,2016
5. Tax avoidance and earnings management of firms in Ghana: does the funding strategy matter?;International Journal of Critical Accounting,2017
Cited by
5 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献