Tax planning in Norwegian private equity-backed companies : do Norwegian PE-backed companies engage in tax planning activities to a larger extent than their peers, and do PE-firms operating in Norway actively look for target companies that hold a potential for tax optimization?
Master thesis
Permanent lenke
http://hdl.handle.net/11250/2382958Utgivelsesdato
2015Metadata
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Sammendrag
We investigate whether Norwegian PE-backed companies engage in tax planning activities
to a larger extent than their peers, and if PE-firms operating in Norway actively look for
targets that hold a potential for tax optimization, by utilizing five proxies for tax planning.
Our results show that Norwegian PE-backed companies exhibit significantly larger leverage
ratios than comparable companies. The PE-backed companies’ leverage ratios are on
average 100.82 percentage points higher than the ratios of non-PE-backed companies. This
indicates that PE-backed companies engage in tax planning activities to a somewhat larger
extent than their peers, by generating debt tax shields. We do although see limitations to
this result, as we have not included holding company debt of the peer companies in our
sample, and as we cast doubt over the relevance of using Leverage Ratio as a proxy for tax
planning. In addition to this, none of the four other proxies for tax planning we investigate
display significant differences between the tax planning activities performed in PE-backed
companies and comparable non-PE-backed companies. This result is very different from
the findings in similar studies performed on American and Finnish data, and indicates that
Norwegian PE-backed companies are much less tax aggressive than similar foreign
companies. Our research also shows that PE-firms operating in Norway do not deliberately
seek out target companies that hold a potential for tax optimization, as there exist no
differences in the level of tax planning activities in PE-Target companies and comparable
non-PE-backed firms.