The Effect of Tax Planning on Financial Performance in the Stock Exchange of Thailand

Abstract

This paper aims to examine the association of tax planning (hereafter called TP) on financial performance (hereafter called FP) in the Stock Exchange of Thailand during the year 2014-2016. The sample size, which excludes the financial sector, consists of 873 firm-years. The TP is measured by effective tax rate (hereafter called ETR) and the ratio of tax expenses to total assets (hereafter called TAX/ASSET), while the FP is measured by return on equity. This paper finds that the TP has both effects on the FP. The effect is positive when measured by ETR, while it is negative if measurement is TAX/ASSET. Regarding to control variables, the BIG4 auditors have positive effects on the FP. The results further indicate that the relationship between the FP and TP (measured by TAX/ASSET) is significantly negative for non-BIG4 auditors. The relationship is thus weak and insignificant for BIG4 auditors. The results are, therefore, useful to provide guideline for listed companies in managing capital and resources more efficiently.