Debt tax shield and firm value: empirical evidence from listed companies in Vietnam

Abstract

In the present study, panel data in fiscal year from 2008 to 2015 has been collected to reveal the interaction between debt tax shield and firm value. The main purpose is to examine the value of debt tax shield and its effect on firm value toward taxation. The reverse approach is employed in which the future profitability is regressed on firm value and debt using non-linear least square. The advantage of reverse method is to shift measurement bias in future operating income to the regression residual and to enhance the usefulness of market factors to control for risk and expected growth. This way also includes nontax information in the market value variable. As a result, debt tax shield has negative effect on firm value. The predicted value for debt tax shield approximately gets 37 percent of debt or gets 9.5 percent of firm value.