Taxation and Business Decisions: An Analysis of the Level of Fixed Assets and Debt before and after the End of Indexation in Brazil

摘要

Based on the assumption that taxation affects corporate decisions, this study was carried out to assess the behavior of the relative values of fixed assets and debt of companies listed on the S?o Paulo Stock Exchange (Bovespa) between 1991 and 2000. A period that straddles the extinction of indexation in Brazil after the implementation of the Real Plan in June 1994, which finally controlled the rampant inflation that had afflicted the Brazilian economy for the previous decade and a half. For this purpose, it was selected 175 firms, restricted by the availability of data, and applied to traditional linear regression models: the first to analyze the impact based on the ratio of fixed assets to total assets, and the second using the ratio of debt to total assets. To evaluate the behavior of fixed assets and debt in the 1991-1995 and 1996-2000 periods, respectively with and without indexation, we used the t-test. The results indicate that the firms’ debt increased with the extinction of indexation, while the level of fixed assets declined. These results were the same when the firms were divided into the four main economic sectors. With respect to the key issue of this study, whether the level of fixed assets and debt differs in periods with and without indexation, the results indicate the existence of significant differences. This work contributes to show how tax rules, by impacting accounting information, influence the operational decisions of firms. The historical context of high inflation in Brazil offers a propitious setting to document the effects of the extinction of a tax accounting rule on corporate decisions regarding the levels of fixed assets and debt.