The Effect of Tax Subsidy on Foreign Equity Ownership
Asian Tax Journal Vol. 18 No. 3 (2017), pp. 41-61
Abstract
This research examines the relation between tax subsidy and foreign equity ownership. Previous researches report the mixed findings on decisions of foreign investors. Therefore, this study hypothesis is that the tax subsidy is not related with foreign equity ownership. The sample consists of non－financial(5,107) listed KOSPI firm with tax subsidy from 2001 to 2011. We measure tax subsidy variable following Choi and Kim(2010)’s methodology. And we use 1－year－average foreign equity ownership and 3－year－average foreign equity ownership as proxies for foreign equity ownership. After the controlling for variable to related tax subsidy, the regression coefficient for the tax subsidy presents statistically significant negative sign. These results imply that the foreign investors do not expect tax subsidy to increase net income. This research is expect to provide a empirical data that the foreign investor consider tax strategy before their portfolio selection. These results may assist policy makers better understand how the tax subsidy effects foreign equity ownership
Keywords
- Tax Subsidy
- Foreign Equity Ownership
- Conservatism
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