Tax aggressivity, government participation, and market risk of companies listed on B3

Abstract

Purpose: The objective of this paper is to investigate whether the government’s shareholding has an influence on the relationship between tax aggressiveness and market risk for companies listed on the Brazilian stock exchange (Brasil, Bolsa, Balcão [B3]). Originality/value: This study seeks to highlight whether tax avoidance or evasion strategies have a distinct impact on the market risk of companies with government stockholding compared to those without. Despite this context being common between developed and developing countries, this approach has not yet been registered in the literature, thus, configuring the originality of the study. Design/methodology/approach: The data used covers the period from 2010 to 2021. The TAVR (Value added tax rate) variable is used to measure the level of tax aggressiveness disclosed in the value-added statement, and the Gov dummy variable is used to distinguish companies with government participation. The model was estimated for testing hypotheses using a panel multiple regression analysis, employing controls already reported in the literature. Findings: Although it was not possible to conclude that the companies with governmental participation have their risks less affected by tax aggressiveness, the results indicate a negative and significant relationship between this participation and the market risk, suggesting that the companies with this characteristic tend to reduce their risks.