| Abstract: |
This study quantifies the impact of corporate tax policies on shareholder
equity with a particular focus on the role of effective tax planning,
potential violations, and the overall value of firm operations. A
descriptive–correlational research design was adopted, drawing on the
theoretical foundations of agency theory, stakeholder theory, and legitimacy
theory. The analysis was conducted on 150 multinational corporations operating
in the technology, pharmaceutical, and manufacturing sectors over the period
2018 to 2023. Panel data regression results demonstrate a significant negative
association between the effective tax rate and firm value. This finding
explains that tax-minimizing strategies contribute positively to firm
valuation. However, the study further reveals that the benefits of stratified
effective tax rate strategies can only be sustained in the long run under
conditions of strong governance structures. Firms with well-developed
governance systems, including independent boards of directors and robust audit
and control mechanisms, were able to mitigate the reputational and regulatory
risks typically associated with aggressive tax minimization. An industry-level
analysis highlights that the technology sector, which relies heavily on
intangible assets, faces stricter regulatory scrutiny and correspondingly
higher risk exposure. The evidence indicates that while tax relocations and
planning strategies may enhance short-term shareholder value, unethical
practices or deviations from regulatory standards compromise long-term
sustainability. The study concludes that there is a pressing need for
transparent, stakeholder-oriented, and well-regulated taxation practices. By
embedding such practices into corporate governance frameworks, firms can
achieve a balance between maximizing shareholder value and ensuring compliance
with ethical and legal expectations. That would present a sustainable value
creation that is suitable for the managers and policymakers. |