Meta-Analysis of the Effect of Taxation on Capital Structure of Companies

Text Research in the domain of 'the effect of tax on capital structure' has yielded varied results. Some studies suggest a positive correlation between taxation and capital structure, while others indicate a negative impact, and yet others find no significant link. To comprehend these diverse and unclear outcomes, this study employs a multilevel meta-analysis approach. After carefully checking the content and selecting them based on the meta-analysis research method, 48 foreign studies encompassing 379 effect sizes were chosen for examination. In the second stage of the meta-analysis, the overall effect size was determined by a weighted combination of the effect sizes derived from 48 individual studies. At the initial level of meta-analysis, the effect size for each study was determined by aggregating that study's coefficients. The conclusive findings, after adjusting for publication bias and considering moderating variables, reveal that taxation exerts a minor negative influence on capital structure. Moreover, this study demonstrates that the metrics used to assess capital structure and taxation, the period of investigation, and control variables like earnings volatility, firm age, and size significantly account for the variations in outcomes across different studies. In this context, when the capital structure is gauged using book leverage and long-term debt indices, and the tax index is represented by the effective tax rate, there exists a negative relationship between tax considerations and the capital structure. Additionally, control variables such as company size earning volatility and company age serve to reinforce the negative relationship between taxation and capital structure