Gender diversity in corporate boardroom and tax avoidance the evidence in hose listed firms

Vietnam overview

Female labor and pay gap in Vietnam

According to World Bank data, Vietnam boasts a high female labor participation rate, consistently matching male participation at over 72% since 2000, while male participation hovers around 82% The General Statistics Office (GSO) of Vietnam reports that women constitute more than 40% of the national labor force However, the International Labor Organization (ILO) highlights a widening gender pay gap, with Vietnamese women earning 13% less than men in 2011, and this disparity increasing to 20-30% in subsequent years.

In 2012, the global average gender pay gap was approximately 17 percent, with the latest Labor Force Survey Report revealing that women earn less than their male counterparts across all economic sectors, including those traditionally favoring women, such as healthcare and social work This indicates that remuneration is influenced more by the worker's gender than by the actual content of their work Therefore, it is essential to enforce the principle of "equal pay for work of equal value," as outlined in the Labor Code.

Figure 1.1 Labor force participation rates (%)

1 (female/male) labor force participation rate = % of (female/male) population ages 15+ having a job

Figure 1.2: Nationwide female employed population

Recognizing the vital role of women in Vietnam's labor force is essential for economic development, moving beyond traditional household expectations Madam Nguyen Thi Tuyet Minh, Chairwoman of the Vietnam Women Entrepreneurs Council (VWEC), highlights that women are crucial in addressing international challenges The theme of "Creative women, creative economies" was prominently featured at the Global Summit of Women 2015 in Sao Paulo, Brazil, where experts concurred that the wisdom, insight, and determination of Vietnamese women merit promotion to leadership positions in both business and social sectors.

Women participation in firm management in Vietnam

Some representatives of richest and most powerful women in stock market like Ms. Truong Thi Le Khanh (chairwoman cum CEO of Vinh Hoan Company), Ms Pham Thu Huong,

Women in leadership roles, such as Ms Pham Thuy Hang of Vingroup and Ms Mai Kieu Lien of Vinamilk, face significant challenges despite their achievements As they navigate high-pressure environments in corporate and political spheres, they must balance decision-making responsibilities, influence male colleagues, and meet client expectations, all while fulfilling traditional roles as caregivers Additionally, societal pressures regarding appearance and behavior further complicate their positions To effectively bridge the gender gap, it is essential for female professionals to pursue education and skill development, with support from trade unions and social organizations, to break through the glass ceiling.

The International Labour Organization (ILO) has collaborated with organizations like the Vietnam Chamber of Commerce and Industry (VCCI) to create jobs and alleviate poverty With the ILO's support, legal frameworks promoting women's economic empowerment have been established, including the Gender Equity Law (2007) and various directives and resolutions aimed at enhancing gender equity Vietnam actively participates in global and regional conferences focused on women's issues, fostering discussions that encourage women's engagement in social and economic spheres Notably, at the Global Summit of Women in 2016, a key forum for women's leadership development, significant strides were made towards empowering women in various sectors.

The "Women on Boards Roundtable" emphasizes the importance of appointing female leaders based on merit rather than as a result of eliminating discrimination Shoko Ishikawa, Country Representative for United Nations Women in Vietnam, underscores the need to showcase role models and positive representations of women in leadership positions She advocates for promoting women's involvement in non-traditional careers such as business, science, and architecture to transform societal perceptions of women's capabilities in various roles.

Tax avoidance in Vietnam

In recent years, the Vietnam General Department of Taxation has made significant improvements in policies and procedures that positively affect the business community Between 2014 and 2016, tax declaration and administrative procedures were gradually simplified to lower compliance costs and time for businesses Additionally, the tax sector has implemented various regulations from the Government and the Ministry of Finance, including Circulars No 92, 96, 110, and 127/2015/TT-BTC, as well as Resolutions 19 and 35, aimed at simplifying tax administration and facilitating the transition to electronic tax filing.

The glass ceiling is an invisible yet significant barrier that hinders qualified and deserving employees from advancing, often due to factors such as age, ethnicity, political or religious affiliation, and gender identity Additionally, the growing competitiveness among businesses, coupled with fair tax rates, facilitates capital acquisition and strengthens the state budget through domestic revenue sources.

The General Department of Taxation is set to implement measures aimed at expanding the tax base, including a proposed single VAT rate as part of tax reform Additionally, revenue generated from land and property is viewed as a crucial future source for the State budget To promote fairness between domestic and foreign businesses, the tax service has recommended lowering corporate income tax and enhancing the legal framework for enforcing transfer pricing regulations.

Table 1.1: Corporate income tax since 2013

Effective time Entities CIT Documents

All firms excluding below list 25% Circular

Exploration and exploitation oil and gas 32%- operations in Vietnam 50%

Exploration and exploitation valuable resources operations Vietnam (exclude oil and gas) 50%

Mines (70% locations belongs to region difficult economic and social conditions 40%

Firms’ revenue less than VND 20 billion 20% Circular Firms’ revenue from VND 20 billion 25% 141/2013/TT-

BTC issued on New established firms since 01 July, 2013

(excluding tax-favored list) 25% 16 October,

Firms’ revenue less than VND 20 billion 20% Circular Firms’ revenue from VND 20 billion 22% 78/2014/TT-

BTC issued on New established firms less than 12 months (excluding tax-favored list) 22% 18 June, 2014 From 01 January, 2016 All firms (excluding tax-favored list) 20%

Circular 96/2015/TT- BTC issued on

(Source: the author summarized from gdt.gov.vn)

Since 2013, corporate income tax (CIT) in Vietnam has undergone several adjustments, as detailed in Table 1.1 Despite a 3% reduction in CIT between 2013 and 2015, experts contend that overall tax burdens remain significantly high compared to neighboring countries According to a World Bank survey, Vietnamese businesses face total tax expenses ranging from 39.4% to 40% of their profits, encompassing CIT, land tax, and labor-related health and social insurance This creates a stark contrast with countries like Indonesia (29.7%), Thailand (27.5%), Cambodia (21%), and Singapore (18.4%) In response to this disparity, a proposal to further reduce CIT to 17% was submitted to the National Assembly in 2017.

Tax and transfer pricing audits are conducted in large provinces and cities including Hanoi, Ho Chi Minh, Binh Duong, Lam Dong, Thanh Hoa, Quang Ninh, Bac Ninh, Khanh Hoa,

In 2012, tax authorities targeted 7,800 companies, particularly foreign-invested firms, for transfer pricing inspections in regions like An Giang, Vinh Phuc, and Ba Ria-Vung Tau A 2014 investigation of 870 foreign companies revealed that 720 were involved in tax fraud, resulting in nearly VND 400 billion (approximately US$19 million) in back taxes and penalties Common practices included profit shifting through inflated purchase prices for tangible assets and reduced selling prices for finished goods Additionally, these foreign firms incurred excessive costs for technology transfers and trademark fees, particularly in the services and consumer products sectors, which paid inflated royalties to parent companies Despite tax regulations permitting valid invoices and inter-company agreements as evidence for corporate income tax and value-added tax, monitoring the transactions of multinational corporations remains challenging.

Since 2011, efforts to enhance transfer pricing enforcement in Vietnam have led to the establishment of specialized transfer pricing teams in Ho Chi Minh City, with plans to expand to larger provinces Between 2012 and 2013, the EU Commission, in collaboration with the OECD and World Bank, launched a project aimed at strengthening Vietnam's transfer pricing regulations and tax compliance This initiative provided tax officers with essential knowledge, tools, and practical skills to effectively implement and enforce these regulations On May 21, 2012, Vietnam's Ministry of Finance approved Decision No 1250/QD-BTC, which outlined the National Action Plan for 2012-2015 to combat tax avoidance, with a specific focus on transfer pricing.

Research objective

Improvements in regulatory frameworks, technology, administrative procedures, and tax policies have been implemented to foster a healthy business environment Additionally, significant enhancements have been made to the stock market, which serves as a vital channel for raising medium and long-term capital.

By the end of 2015, market capitalization achieved over 1298.53 trillion, with 1146.9 trillion in

Ho Chi Minh Stock market (HOSE) and more than 151.6 trillion in Hanoi Stock Market (HNX) 3

The VN-index on HOSE rose by 4.13 percent, with 28 billion shares traded out of a total of 39.7 billion in the market Between 2016 and 2020, approximately 500 state-owned enterprises are undergoing equitization, providing investors with more opportunities and boosting market capitalization Therefore, ensuring transparency, professionalism, and fairness for both investors and organizations is essential.

The tax sector has recently scrutinized tax evasion within foreign direct investment (FDI) enterprises, identifying it as illegal tax avoidance This fraudulent activity often mimics general tax planning strategies, where firms inflate reported expenses to lower their profits and tax liabilities While many companies utilize legal forms of tax planning across various tax rates globally, taxpayers can exploit legislative provisions or loopholes for tax benefits, a practice known as broad tax avoidance (Hanlon and Heitzman, 2010) This approach is increasingly recognized as a significant concern in corporate governance (Tricker, 2015).

Recent economic and social changes have significantly impacted women's participation in the labor market and their opportunities for leadership roles As women increasingly engage in the workforce, they seek not only financial independence but also a voice in decision-making processes Competing alongside men, female board members are compelled to demonstrate their ability to deliver value and results for their organizations This study aims to investigate the contributions of women board directors to the unique aspects of corporate governance and social responsibility in firms listed on the HOSE, with a particular focus on tax avoidance behavior.

3 http://ncseif.gov.vn http://tapchitaichinh.vn/

To solve the above research objectives, the study will answer three questions in correspondence with three considered matters:

1 Is presence of women in boardroom associated with tax avoidance?

2 Is there any relationship between chairwoman and tax avoidance?

3 Is female executive in boardroom related to tax avoidance?

Research design

This study examines the impact of gender diversity in boardrooms on corporate tax avoidance, utilizing panel data from 296 firms listed on the HOSE between 2010 and 2015 Through fixed effects regression analysis, the research investigates the hypothesis that female board directors are significantly linked to tax avoidance practices.

The corporate board of directors plays a crucial role in addressing the rights and interests of stakeholders, particularly investors in publicly listed companies Numerous studies, including those by Erhard et al (2003) and Carter et al (2003), highlight the positive correlation between the presence of female directors and enhanced financial performance, evidenced by metrics such as return on assets (ROA), return on investment (ROI), and Tobin’s Q Furthermore, Lückerath-Rovers (2013) indicates that companies with women on their boards tend to exhibit superior performance, reflected in higher returns on equity (ROE).

Research in psychology and economics indicates that women generally exhibit greater risk aversion compared to men, with studies highlighting men's tendency toward overconfidence, which influences their risk perception (Huang and Kisgen, 2013) While female CFOs engage in tax avoidance similarly to their male counterparts, they tend to be more selective about tax-saving opportunities due to their risk-averse nature Interestingly, female fund managers show comparable performance and investment behavior to males, and even professional female analysts provide bold and accurate forecasts (Atkinson et al., 2003; Kumar, 2010) Consequently, the presence of women in boardrooms is believed to be negatively correlated with tax avoidance strategies.

The research identifies three distinct proxies for tax avoidance, revealing that the presence of women in the boardroom generally correlates with reduced tax avoidance, as they tend to incur higher cash tax expenses While women in executive positions focus on reported values to achieve a higher book effective tax rate, chairwomen, in contrast, are positively associated with tax avoidance strategies aimed at maximizing shareholder benefits.

This article is structured into five chapters: the first chapter outlines the research problem, objectives, and questions, along with a summary of the data and literature reviewed The second chapter discusses theoretical literature and previous empirical studies on the impact of female board members on tax avoidance The third chapter details the data measurement and regression models used in the methodology Chapter four presents the research findings, while the fifth chapter concludes with an analysis of the results and their implications.

Gender diversity and corporate governance

Resource-dependence theory

Resource dependence theory highlights that effective corporate governance is enhanced by the connections between a company's board and its internal and external resources This linkage offers four key benefits: it facilitates the establishment of valuable information, serves as a communication channel, aids in securing commitments for internal resource support, and enhances organizational legitimacy Notably, the theory posits that gender diversity on boards contributes to legitimacy, as the presence of female directors sends a positive signal to stakeholders (Pfeffer and Salancik, 1989).

Women directors play a crucial role in promoting career equality and enhancing corporate boards' demographic diversity, which positively impacts a firm's reputation and aligns with social expectations This gender diversity fosters a customer-oriented approach and influences political dynamics Additionally, directors are responsible for managing stakeholder communications and legitimizing corporate actions, which helps mobilize external support and resources Consequently, stakeholders, particularly shareholders, prioritize not only profitability but also the importance of good corporate citizenship and ethical behavior in firms.

Diversity plays a crucial role in enhancing team performance by fostering a variety of perspectives and facilitating idea exchange (Kang et al., 2007) Specifically, gender diversity within corporate boardrooms not only improves internal competition but also cultivates positive societal perceptions As a result, increased gender diversity in leadership positions is linked to enhanced firm performance through valuable resource connections (Carter et al., 2003; Rose, 2007).

Agency theory

In agency theory, the boards and managers should monitor the actions as agent on behalf of their shareholders to maximize shareholders wealth (Huse and Rindova, 2001) This primary

The 22 standard for evaluating corporate performance focuses on two key aspects: board composition and leadership structure, both of which significantly influence organizational performance (Van der Walt and Ingley, 2003) From an agency theory viewpoint, a higher ratio of outside directors enhances the board's ability to oversee managerial self-interest, thereby reducing agency costs In this context, diversity serves as a crucial indicator of boardroom independence.

To mitigate the influence of powerful minorities in decision-making, it is essential to separate or at least balance the roles of the chief executive and the chairman of the board (Walt and Ingley, 2003) Classical management theory often overlooks the board's position within the organizational structure, treating it as separate from management While executive officers have distinct authorities and responsibilities, all board directors share equal duty and power (Tricker, 2015) Consequently, although executive directors hold managerial roles, governance has become increasingly vital in modern business, surpassing the importance of management (Tricker, 2015).

The primary concern regarding agency costs revolves around the independence of directors and the equilibrium between executive and non-executive directors on boards Both agency theory and the resource dependence perspective effectively highlight the essential elements of governance that justify the need for diversity within the boardroom.

Gender equality reaction in corporate boardroom

Diversity enhances market understanding, fosters creativity and innovation, and improves problem-solving abilities, as individuals from varied genders, ethnicities, educational backgrounds, and cultures often challenge conventional thinking (Carter et al., 2003) The drive for gender diversity primarily stems from the need for equal treatment and career opportunities for women, which ultimately benefits organizations (Villiers, 2010).

Norway became the first country to successfully implement a legislative quota mandating 40 percent female representation on corporate boards by January 2008 (Hoel, 2009) Following this, Spain introduced the Diversity in Corporate Governance Code in 2007, recommending a balanced board with at least 40 percent representation from both genders, aiming for compliance by 2015 (Lückerath-Rovers, 2010; Pande and Ford, 2011) The Netherlands, which had only 5 percent female directors in 2008, updated its Corporate Governance Code to target 25 to 30 percent female representation by 2015 (Lückerath-Rovers, 2009; Lückerath-Rovers, 2010) France also enacted a gender quota for corporate boards in 2010, setting a timeline to achieve 20 percent female representation by 2013 and 40 percent by 2015 (Pande and Ford, 2011) Despite challenges, promoting balanced gender leadership is viewed as a key solution to addressing inequality in the business environment.

The representation of female talent at the board level is gaining momentum globally, with notable trends observed in countries such as Belgium, Canada, Italy, the United Kingdom, Australia, various Middle Eastern nations, and developing countries in Asia (Terjensen et al., 2009; Villiers, 2010; Pande and Ford, 2011).

In 2007, Australia’s top companies reported only 85 women among 820 total member directors, with 33 companies having no female directors at all A decade later, Villiers (2010) observed a modest increase in the United Kingdom, where female-held directorships rose from 5.8 percent to 12.2 percent The study suggests that the trend of tokenistic recruitment of women directors has also grown, increasing from 58 percent in 2000 to 75 percent in recent years.

In 2009, some Norwegian public companies unexpectedly opted to convert to private status or register in the United Kingdom rather than comply with mandated gender quotas This trend highlights the ongoing gender imbalance on corporate boards, underscoring the need for a reevaluation of corporate governance practices to ensure equal rights for women in modern corporate environments.

Tax avoidance and corporate governance

Tax avoidance

Corporate income tax represents a significant expense for profitable firms, prompting a continual focus on reduction strategies While it serves as a primary revenue source for governments, leading to various policies aimed at preventing tax cuts, the classification of tax reduction as permissible or illegal remains ambiguous (Hanlon and Heitzman, 2010) Moreover, the concept of "tax avoidance" lacks a universally accepted definition, complicating discussions around its legitimacy.

Tokenism refers to actions that superficially appear to benefit marginalized groups in society, often masking underlying inequities, while also representing a range of tax planning strategies (Dyreng et al., 2008) According to Hanlon and Heitzman (2010), tax avoidance is defined as the practice of minimizing explicit taxes relative to pre-tax earnings, without differentiating between tax-favored activities or lobbying efforts.

Tax avoidance has both direct and indirect consequences for firms By adjusting non-deductible expenses to reduce taxable income, companies can enhance cash flow and attract investor interest However, there is a potential negative relationship between tax avoidance and firm value in the capital market, as highlighted by Kim et al (2011), who found a significant link between tax avoidance and stock price crash risk Additionally, non-debt tax shields can lead to lower marginal benefits and influence capital structure decisions, as noted by Graham and Tucker (2006) and Kim et al (2010).

The literature on tax avoidance is still developing, lacking a clear conceptual definition, which poses challenges for researchers and investors in estimating tax positions from financial statements (Liswosky, 2008; Hanlon and Heitzman, 2010) Evaluating tax planning through visible financial statement elements can lead to inaccuracies (Hanlon and Heitzman, 2010) Many researchers rely on reported current tax expenses scaled by statutory tax rates to infer estimated taxable income or tax liabilities (Frank, 2009; Wang, 2010; Hanlon and Heitzman, 2010; Lennox et al., 2012) Additionally, firms operating under different economic or business models exhibit discrepancies between Generally Accepted Accounting Principles (GAAP) and tax law revenue recognition (Blaylock et al., 2010) Traditionally, using public financial statement data to assess general tax avoidance is primarily effective for identifying non-conforming tax positions that reduce taxable income compared to GAAP income (Hanlon and Heitzman, 2010).

Tax avoidance and corporate governance

Tax avoidance has become a significant focus in tax research, with recent empirical studies examining its determinants and consequences The tax accounting literature explores variations in tax avoidance and the motivations behind different levels of tax planning, including the impact of incentivizing policies (Phillips, 2003; Armstrong et al., 2012) In addition to traditional corporate governance factors such as compensation incentives and ownership structure, researchers are increasingly investigating the role of board composition, trade unions, and social responsibility in relation to tax avoidance (Lietz, 2013).

Recent studies have increasingly focused on the determinants and consequences of tax avoidance, particularly highlighting the influence of directors and executives on tax reporting Research by Dyreng et al (2010) reveals a significant link between top executives and the cash effective tax rate as a measure of tax avoidance Additionally, Rego and Wilson (2012) suggest a positive correlation between tax aggressiveness and equity risk incentives tied to managerial compensation Furthermore, Lanix and Richardson (2011) found that a higher presence of independent board directors is associated with reduced tax avoidance Overall, the interplay between tax avoidance and corporate governance is becoming a prominent area of study.

Numerous studies have sought to explain the cross-sectional variation in tax avoidance, often emphasizing the impact of corporate governance characteristics such as compensation practices, executive incentives, and ownership structures McGuire et al (2011) explore how dual-class stock ownership contributes to agency conflicts related to corporate tax avoidance Similarly, Hanlon et al (2007) and Armstrong et al (2015) examine the relationship between corporate governance, managerial incentives, and tax avoidance Hanlon et al (2007) utilize the "Gompers-Index" as a governance measure to assess its influence on tax noncompliance, concluding that governance quality is not a significant determinant of corporate tax noncompliance Additionally, they find that tax deficiencies in foreign-controlled groups are less pronounced than in purely domestic groups.

Recent research increasingly focuses on the corporate dimensions of tax avoidance Drawing from agency theory regarding corporate board roles, Minnick and Noga (2010) explore four aspects of corporate governance, including board composition, to assess its impact on long-term tax management Their findings indicate that larger board sizes and a greater number of independent directors are positively correlated with effective tax rates This aligns with Lanis and Richardson's (2011) study on the influence of board composition on tax aggressiveness in Australia, which reveals that a higher proportion of non-employee directors can diminish the likelihood of tax aggressive behavior Thus, boardroom diversity is significantly linked to tax avoidance practices.

Gender diversity in boardroom and tax avoidance

Women’ participation in boardroom and tax avoidance

Many firms strive to minimize corporate tax expenses, yet there are significant disparities in tax positions among companies, even within the same industry Some firms end up paying more taxes, while others successfully avoid taxes at similar or lower rates This variation in tax avoidance behavior raises the intriguing question known as the "under-sheltering puzzle" (Desai and Dharmapala 2006; Hanlon and Heitzman 2010).

Avoiding taxes can incur significant costs, both tax-related and non-tax-related, such as implementation expenses, potential penalties, lobbying efforts with tax authorities, and damage to a firm's reputation (Rego and Wilson 2012) The risks associated with serious tax avoidance can be particularly high, as firms may face scrutiny from tax authorities Publicly traded companies, in particular, must contend with auditors and securities regulators, making them more vulnerable to challenges regarding their tax positions, which are often not substantiated by concrete evidence This increases the likelihood of facing substantial penalties (Lisowsky).

In 2009, Wilson estimated that penalties for tax shelter transactions in the United States could reach up to 40% of the original tax savings for affected firms Additionally, companies engaging in tax avoidance face significant reputation costs, as the media frequently portrays aggressive tax strategies in a negative manner, impacting public perception Notable examples include Coca-Cola and Metro Cash.

In Vietnam, the company 28 and Carry has come under scrutiny for significant tax avoidance through transfer pricing practices last year, leading to growing frustration among the community This situation poses a greater risk for publicly listed firms, as it could negatively affect investor confidence and impact their reputation.

Research has consistently shown that women exhibit greater risk aversion compared to men, a trend observed in both psychology and economics This difference in risk-taking behavior can be attributed to several factors: women often experience heightened nervousness and fear in uncertain situations, possess lower confidence levels that may skew their perception of risk probabilities (Huang and Kisgen, 2013), and tend to perceive risky scenarios as threats rather than challenges Consequently, the presence of women in boardrooms is believed to correlate negatively with tax avoidance practices.

H1: participation of female directors in boardroom likely reduces tax avoidance

Chairwomen and tax avoidance

Investors perceive tax avoidance as a transaction that reallocates resources from the state to shareholders and is linked to incentive compensation plans Research by Phillips (2003) indicates that effective tax planning is enhanced when business-unit managers are compensated based on after-tax performance, although this does not apply to CEOs Additionally, Hanlon et al (2007) provide evidence that incentive schemes for executives are connected to increased tax noncompliance, reinforcing the notion that executives are incentivized to minimize tax obligations.

Publicly traded firms must ensure their corporate board of directors are responsive to stakeholders, particularly investors Research indicates that the presence of women on boards positively impacts financial performance; for instance, Erhard et al (2003) found a correlation between female and minority board members and improved return on assets (ROA) and return on investment (ROI) among 127 large US companies Similarly, Carter et al (2003) identified a positive relationship between female board members and factors such as firm size, board size, and Tobin’s Q, a measure of firm value, within Fortune 1000 companies Additionally, Lückerath-Rovers (2013) highlighted that companies in the Netherlands with women on their boards tend to achieve higher return on equity (ROE), suggesting that the role of chairwomen is essential for fostering good corporate governance and reducing costs associated with managerial opportunism, including tax avoidance.

The quality of decision-making and its impact on firm performance are challenging to measure due to various influencing factors Ryan and Haslam (2005) introduced the concept of the "glass cliff" while examining the poor performance of companies that appointed female directors during economic downturns They found no significant short-term effects from the presence of female directors in unstable situations, suggesting that male directors would likely be favored if shareholder value improved after this period.

A 2007 study indicates no significant correlation between Tobin’s Q and gender diversity on Danish boards, yet emphasizes the importance of women in high positions to enhance decision-making influence Consequently, chairwomen serve as key advocates for promoting transparent corporate governance, prioritizing it over merely reducing tax liabilities to boost shareholder benefits.

H2: chairwomen in HOSE listed firms and tax avoidance activities have negative relationship

Female executive in boardroom and tax avoidance

The agency perspective on tax avoidance, as introduced by Desai et al (2007), highlights that tax avoidance can enable managerial opportunism, allowing self-interested managers to mask their rent extraction strategies Conversely, Rego and Wilson (2012) identify a positive correlation between tax avoidance and the equity risk incentives of top executives, suggesting that after-tax incentives can drive CEOs to adopt more aggressive tax strategies, thereby boosting their personal after-tax earnings without enhancing the overall corporate after-tax value Consequently, addressing agency costs becomes a governance issue, necessitating effective monitoring of managers and the implementation of suitable incentives.

While traditional governance and agency theories do not endorse the presence of executive directors in boardrooms, these executives play a crucial role in executing tax-planning strategies, including organizational restructuring and the identification of low-tax jurisdictions, which may sometimes involve unethical practices Additionally, the involvement of female executives in these processes is noteworthy.

A study by Huang and Kisgen (2013) reveals that female executives demonstrate lower confidence in critical decision-making areas, such as acquisitions and debt issuance, compared to their male counterparts This raises questions about the potential link between women's risk aversion and the agency problem related to excessive tax avoidance, which could negatively impact shareholder benefits Consequently, it appears that female directors in managerial roles may be less inclined to engage in high-risk tax avoidance strategies.

H3: executive female directorship is negative associated with tax avoidance.

Summary

In today's business landscape, corporate governance has gained significant importance, with gender diversity and tax avoidance emerging as key topics Research indicates that women in high-ranking positions are essential for making impactful decisions within organizations Consequently, it is crucial to analyze the influence of female board directors on tax avoidance, taking into account the significant roles they occupy.

Table 2.1: Summary hypotheses and research questions

Research questions Hypotheses Sub-hypotheses

1 Is presence of women in boardroom associated with tax avoidance?

H1: participation of female directors in boardroom likely reduces tax avoidance

H1.1: availability of female directors in boardroom likely reduces tax avoidance

H1.2: increasing number of female directors in boardroom likely reduces tax avoidance

H1.3: increasing proportion of female directors in boardroom likely reduces tax avoidance

2 Is there any relationship between chairwoman and tax avoidance?

H2: chairwomen in HOSE listed firms and tax avoidance activities have negative relationship

3 Is female executive in boardroom related to tax avoidance?

H3: executive female directorship is negative associated with tax avoidance

GAAP ETR CASH ETRBTD

Analytical framework

The relationship between female board directors and tax avoidance is analyzed through a framework that identifies the presence and roles of women on boards as dependent variables Additionally, selected firm attributes serve as control variables in the regression models to explain the performance of tax avoidance activities.

Data and data source

This study investigates the connection between female board directors and tax avoidance activities by analyzing data from the annual reports and financial statements of listed companies on the Ho Chi Minh Stock Exchange (HOSE) from 2010 to 2015 The research encompasses 319 firms currently listed on HOSE, classified according to Vietstock.vn's industry classification, aligning with the Vietnam Standard Industrial classification.

In the Classification VSIC 2007 study, firms were categorized into eight distinct groups following the exclusion of financial and insurance companies, as well as those with incomplete data The final analysis encompasses 1,776 firm-year observations from 296 public firms across these eight categories (refer to Appendix A for details).

The primary data source for this study includes financial data and board information collected manually from Vietstock.vn and Viet Capital Securities' website Despite differing industry classifications, both platforms provide consistent firm accounting information The income statement reveals income, profit, and expense data, while the balance sheet offers insights into capital and asset structure Additionally, all control variables and calculations related to tax avoidance are derived from this data, with gender information sourced from the annual reports available on Vietstock.vn.

Research model

Baseline model

The statistic regression model to estimate relationship of women board directors and tax avoidance can be written as the baseline model as below:

TAXAVD it = β 0 + ∑ k β k WOMAN k it + ∑ m β m CONTROL m it + ∑ i β i FIRM i + ∑ t β t Year t

Tables 3.1 and 3.2 detail the structure and construction of the dependent, independent, and control variables used in the baseline regression The subsequent sections of the paper will discuss each variable in depth It is important to note that the dependent variable, TAXAVD, is assessed using multiple proxies, while the independent variable, WOMAN, comprises three distinct regressors.

Total tax expense/Pretax Income of year t (truncated [0, 1]) Gaapetr

(Total tax expense = Current tax expense + Deferred Tax) Cashetr Cash tax paid/Pretax Income of year t (truncated [0, 1])

(Pretax Income – Taxable Income)/ beginning total assetBtd (Taxable income = Current tax expense /statutory tax rate)

The independent variable "wob" is defined as equal to 1 if a firm has at least one female board director, and 0 otherwise The variable "nowob" indicates the total number of female board directors, while "womanratio" represents the proportion of female board directors to total board members.

Indicator that equals 1 if firm has female board director chairwm + - wmexe + -

Control variable appointed as chairwoman, and zero otherwise Number of female board directors being executive managers

Roa - + Net income/ beginning total asset

Llev + - Long term debt/ beginning total asset

Slev + - Short term debt/ beginning total asset

Mb - + Market price/book price

Size - + Natural log at the beginning

Fasset - + Fixed Asset/ beginning total asset

Cash - + Cash and cash equivalents/ beginning total asset sga1 - + SG&A/ beginning total

ETR: effective tax rate, including GAAP ETR and CASH ETR Higher value of ETR represents for lower tax avoidance level

BTD: book-tax different Lower value of BTD respresents for lower tax avoidance level

Variable explanation

Effective tax rate (ETR) and book-tax difference (BTD) are essential measures for assessing tax avoidance in accounting and finance studies Hanlon and Heitzman (2010) highlight that ETR and BTD effectively indicate non-conforming tax avoidance in publicly traded companies with transparent financial statements ETR represents the ratio of tax expense to pretax income, while BTD is the difference between pretax and taxable income Numerous firm-level studies advocate for the use of ETR and BTD to capture broad tax avoidance strategies Dyreng et al (2010) analyze the influence of executives on tax avoidance through two forms of ETR, focusing on total tax expense and cash taxes paid Additionally, Lisowsky et al (2013) investigate both ETR and BTD to explore the legal aspects of tax avoidance, while Lennox et al (2012) employ eight tax avoidance proxies, including five ETRs and three BTDs, to examine the link between aggressive tax reporting and accounting fraud.

The effective tax rate (ETR) is calculated by dividing the tax expense by accounting earnings before tax, reflecting the average tax rate per dollar of income In the GAAP ETR, the numerator is the total income tax expense, which includes both current and deferred tax expenses found in the income statement This figure can be influenced by various factors, such as changes in valuation allowances and tax contingency reserves, but does not account for tax strategies like accelerated depreciation Conversely, the Cash ETR is derived from cash taxes paid, as reported in the cash flow statement, and is influenced by tax deferral strategies while remaining unaffected by changes in tax accounting accruals Additionally, cash taxes paid may encompass taxes from different periods, whereas the denominator considers only current period earnings Higher ETRs, whether GAAP or Cash, indicate a lower tendency for tax avoidance.

Book-tax differences (BTD) are closely linked to effective tax rate (ETR) measures, with BTD representing the difference between taxable income and pretax income, while ETR is calculated as the ratio of tax expense to pretax income Empirical studies often utilize total assets as a scalar for BTD instead of an un-scaled measure Additionally, the lack of financial statement disclosures for external review necessitates estimating taxable income by dividing current tax expense by the statutory tax rate, which can lead to inaccuracies due to unaccounted cash taxes Consequently, a higher BTD indicates a larger discrepancy between pretax income and taxable income, reflecting a greater level of tax avoidance.

Each tax measure has its limitations in computation and features, particularly in how they reflect temporary and permanent tax differences The Cash Effective Tax Rate (CASH ETR) focuses solely on actual cash taxes paid, making it unaffected by changes in tax accounting accruals and not indicative of financial statement impacts In contrast, Book-Tax Differences (BTD) can signify both tax avoidance and earnings management, as they capture any transactions that create discrepancies between financial statement income and taxable income While tax returns could provide a more accurate representation of taxable income, they remain confidential Additionally, total tax expense can be influenced by financial accounting rules, meaning that GAAP Effective Tax Rate (GAAP ETR) serves not only as a proxy for tax avoidance but also reflects the outcomes of financial reporting strategies Generally, a higher ETR suggests less tax avoidance, while a lower BTD indicates the same Prior research often limits the effective tax rates, both GAAP ETR and CASH ETR, to a range between 0 and 1.

Alternative proxies for measuring tax avoidance, such as unrecognized tax benefits and dummy shelters, focus on specific firm behaviors rather than capturing overall tax avoidance Although various proxies exist, they are not universally applicable to all tax research questions Therefore, traditional measures like Effective Tax Rate (ETR) and Book-Tax Differences (BTD) should be employed to accurately address specific instances of tax avoidance, including tax sheltering, evasion, or fraud.

The independent variable for board of director composition is represented by the dummy variable for women on board (WOB), which is coded as one if a firm has at least one female director.

The study examines the impact of female board directors on tax avoidance, hypothesizing that women may prefer less tax avoidance due to their unique perspectives Gender quotas, which mandate a representation of 30 to 40 percent female directors in boardrooms, have been implemented in several developed countries To analyze this, the ratio of women in boardrooms (womanratio), defined as the number of women (nowob) divided by the total board size (bsize), is utilized to assess whether female representation influences effective tax rates or book-tax differences in listed firms.

The chair of the board of directors significantly influences tax reporting and planning strategies, suggesting that firms with a female chair (chairwm) may experience a higher effective tax rate (ETR) or lower book-tax differences (BTD) Additionally, female board members can be categorized as either executive directors (wmexe), who are part of the executive team, or non-executive directors (wmnonexe), who focus on policy-making without daily management responsibilities Numerous studies have explored the gender effects at the executive level, particularly concerning CEOs and CFOs, who play crucial roles in shaping tax reporting and planning Therefore, incorporating female executives into the analysis as independent variables enhances the understanding of women's roles in boardrooms and their impact on tax avoidance strategies.

Research suggests that female board directors hold significant societal positions and influence decision-making (Rose, 2007) This study aims to integrate variables such as women on boards (wob), non-women on boards (nowob), and the ratio of women (womanratio) with top executive roles, specifically chairwomen and executive positions (wmexe), to analyze their impact on tax avoidance It is anticipated that each variable will exhibit a positive or negative coefficient when using proxies like the effective cash rate or book-tax differences to assess tax avoidance.

Two set control variables are included in the regression model presenting the firm’s tax planning opportunities and firm’s operation These variables explain the types of activities and

37 engaged in tax avoidance Most of the control variables are scaled by total asset of the beginning of the year t to partially mitigate potential reserve causality issues.

The attributes of a firm that influence growth and profitability include its value (mb it), economies of scale (size it), profitability (roa it), and financial structure (slev it, llev it, cash it) Research indicates that larger and high-growth firms tend to invest more, thereby increasing their tax avoidance strategies (Francis et al., 2014) Firm size is quantified as the natural logarithm of total assets at the beginning of the year, while mb it represents the market-to-book ratio sourced from vietstock.vn Additionally, a higher return on assets (roa it) is associated with lower taxable income, suggesting that more profitable firms are likely to engage in tax avoidance (Dyreng et al., 2010) High levels of cash and cash equivalents may signal reduced cash tax payments, resulting in a lower cash effective tax rate (CASH ETR) Furthermore, the leverage ratios of long-term (llev it) and short-term debt (slev it) are calculated as the respective debts scaled by beginning assets for the year, with leveraged firms benefiting from tax deductions associated with debt financing, thus enhancing their tax planning strategies.

The second group identifies factors that may alter the discrepancies between book and tax reporting, including sga1 it and fasset it, as discussed by Dyreng et al (2010), McGuire et al (2010), and Francis et al.

Increasing deducted expenses and capital intensity can result in lower taxable income or greater tax avoidance Selling, general, and administrative expenses (SG&A), which encompass managerial incentives, represent significant costs for firms The balance sheets of HOSE-listed companies reveal that fixed assets, including tangible and intangible assets as well as depreciation, are negatively correlated with the cash effective tax rate, while showing a positive association with book-tax differences (BTD).

Research methodology

Regression models

Three statistical regression models are commonly employed to analyze panel data The first model is the simple estimation Pooled Ordinary Least Squares (OLS) To determine the appropriate model, either the Fixed Effects Model (FEM) or the Random Effects Model (REM), researchers should utilize the Hausman test.

In Fixed Effects Model (FEM), the error term and predictor variables are assumed to be correlated, with independent variable slopes remaining constant while intercepts vary across sections but are fixed over time This regression approach effectively controls for omitted variables that differ between cases yet remain constant over time However, FEM cannot account for variables that are fixed over time, such as gender, laws, and religions Ultimately, FEM estimates the impact of independent variables on the dependent variable by analyzing changes in these variables over time.

The Random Effects Model (REM) can effectively estimate the impact of time-invariant variables while assuming that individual-specific effects maintain constant variance However, the results obtained from REM may be biased if there are omitted variables The error term in REM includes components that account for both unchanging and changing omitted effects Furthermore, REM assumes that the unchanging omitted effects are uncorrelated with the independent variables, indicating no relationship between them.

Fixed effects models consistently yield reliable results in panel data regression, despite random effects potentially showing higher p-values Consequently, this study will favor the fixed effects model, even when the Hausman test indicates an insignificant p-value.

Robust standard Errors

In panel data analysis, it is essential to account for potential heteroskedasticity and autocorrelation up to a certain lag, as well as correlation among different groups To address these issues, employing adjusted standard error methods, such as Driscoll-Kraay standard errors, is crucial for obtaining reliable results.

Cash effective tax rateGAAP effective tax rate

Descriptive statistic

Summary descriptive statistic

The descriptive statistics of all varialbes in basesline model (i) in the below table 4.1 in average, the means of two effective tax rates, namely gaapetr and cashetr, are 19.7 percent and

14.5 percent This average rate of GAAP effective tax rate is around 10 percent lower than average current corporate income tax 22 percent, applied from 2014 Meanwhile, the CASH effective tax rate refecting the actual cash tax paid of HOSE listed firms is just around 14.5 percent, which means 34 percent lower than statutory tax rate Moreover, Figure 4.1 shows that there are many firms have no cash tax paid reducing the mean of cash effective tax rate.

Figure 4.1: Graph histogram of tax avoidance measures

Table 4.1: Summary statistics of variables

Description Variable obs Mean S.Dev Min Max

GAAP effective tax rate gaapetr 1643 197 121 0 96

Cash effective tax rate cashetr 1634 145 165 0 99

Number of female board directors nowob 1639 844 97 0 6

Number female executive in boardroom wmexe 1639 302 574 0 4

Number of female member/total womanratio

Net income/beginning asset roa 1710 093 372 -.31 14.71

Market-to-book ratio mb 1776 1.38 1.338 0 18.77

Short term debt/beginning asset slev 1710 834 13.816 002 555.5

Long term debt/beginning asset llev 1710 175 1.175 0 47.392

Fixed asset/beginning asset fasset 1708 321 331 0 6.638

Cash and equivalent/beginning asset cash 1698 138 694 0 27.55

The average book-tax difference (BTD) for HOSE-listed firms is 0.028, indicating a consistent disparity between reported tax and financial income, scaled by beginning assets, in line with findings from previous studies in other countries (McGuire et al., 2010) This discrepancy arises from both temporary and permanent measurement differences (Plesko, 2004; Hanlon and Heitzman, 2010).

The representation of women in the boardroom is illustrated in Table 4.1 and Figure 4.2 In Vietnam, public companies restrict board sizes to between three and eleven members, with an average size of five to six members Notably, firms listed on the HOSE typically maintain medium-sized corporate boards.

The average size of corporate boards for HOSE listed firms is 5.73 members, with a concerning representation of women, as the mean number of women in the boardroom is less than 1 This results in a female director ratio of only 14.6 percent among total board members.

Figure 4.2: Graph histogram of corporate board size and women members

Table 4.1 reveals that the average firm size is 6.79, while the mean market-to-book ratio (mb) stands at 1.38, indicating that most firms listed on HOSE have market prices that align closely with their book values Additionally, the mean return on assets (roa) is 0.093 The average short-term debt leverage ratio (slev) is 0.834, while the long-term debt leverage ratio (llev) averages at 0.175 Furthermore, the mean cash value is 0.138, the average asset value (fasset) is 0.321, and the average selling, general, and administrative expenses (sga1) is 0.094.

The correlation analysis of three tax avoidance measures and other variables, detailed in Appendix B, reveals a strong relationship among independent variables, with correlation values ranging from 0.32 to 0.63 Furthermore, the relationships between control variables and the dependent variable are deemed acceptable Appendix C indicates that the VIF values are low, between 1.3 and 1.4, confirming the absence of collinearity among predictor variables in the regression models.

Women board directors in HOSE listed firms

From 2010 to 2015, the number of firms listed on the Ho Chi Minh Stock Exchange (HOSE) with women in their boardrooms has steadily increased In 2010, there were 135 firms with a total of 206 women serving on their boards By 2015, this figure rose to 143 firms, highlighting a positive trend in gender diversity within corporate leadership.

2011 and 150 firms in 2012 In average, from 2010 to 2015, there has been 5 percent increment of number of firms and number of female board directors However, it is a slight decrease from

150 firms to 147 firms having female directors, and from 234 women to 228 women in 2013.

42 firm w/o wob firm w/t wob firm w/t chairwoman 180

The number of female board directors has recoverd to 246 women in 156 firms (2014) and 254 women in 160 firms (2015).

Figure 4.3: HOSE listed firms having women participating boardroom

(source: the author calculated from data in vietstock.vn)

A significant number of firms appoint only one or two women to their boards, indicating potential tokenism; approximately 60% of these companies have just one female director, while less than 30% have two, and only about 10% have three or more Notably, 1% of firms have more than three women directors However, some companies in the construction, real estate, and manufacturing sectors listed on HOSE have made strides in gender diversity, with firms like JVC, PNJ, RIC, and VIC featuring up to four or five women on their boards, representing 60% of their board composition Additionally, companies like SGT have progressively increased female representation in their boardrooms, rising from 20% in 2010.

From 2011 to 2015, the percentage of women in corporate boardrooms of HOSE listed firms increased significantly, rising from 40 percent in 2013 to between 60 and 80 percent in 2014 and 2015, all while maintaining a stable board size of five members However, boards with 30 percent or more female representation still only account for approximately 15 percent of those with women board directors Overall, the participation of women in these corporate boardrooms remains low in both ratio and quantity.

Approximately 30 women hold top positions in boardrooms as chairwomen, significantly influencing corporate decisions, particularly in tax strategies Additionally, around 85 of the 230 women board members also serve as executive managers, highlighting their critical role in leadership and decision-making processes within firms.

2010 2011 2012 2013 2014 2015 executive manager non-executive manage

- firm w/o wob firm w/t wob firm w/t chairwm firm w/t wmexe

Ave Ave Ave Ave Ave Ave current tax current tax current tax current tax current tax current tax exp.

2015 are holding various positions like CEO, CFO, Human Talent, etc Some of these position affect directly on tax report, some indirectly.

Figure 4.4: Number of executive and non-executive female board director

(source: the author calculated from data in vietstock.vn)

Tax expense in HOSE listed firms having women board directors

Figure 4.5 and Figure 4.6 describe the paying tax status of HOSE listed firms which have women board directors compared with firms have no women in boardroom.

Figure 4.5: Current tax expense in HOSE listed firms (billion VND)

(source: the author calculated from data in vietstock.vn)

- firm w/o wob firm w/t wob firm w/t chairwm firm w/t wmexe

Figure 4.6: Cash tax paid in firms in HOSE listed firms (billion VND)

(source: the author calculated from data in vietstock.vn)

Companies with women board directors tend to incur higher current tax expenses and cash taxes paid compared to those dominated by male directors Notably, firms with chairwomen or female executive board members demonstrate even greater cash payments than their male-exclusive counterparts.

Between 2010 and 2015, companies with a chairwoman paid nearly double the cash taxes compared to those without female leadership Similarly, firms with female board directors and executive managers contributed more in cash taxes than those lacking female representation Notably, these companies exhibited comparable current tax expenses.

Empirical result

GAAP effective tax rate

Table 4.2 summarizes the estimation results of the FEM using gaapetr as a proxy for tax avoidance The findings indicate that the coefficients for women's availability variables, including wob, nowob, and womanratio, are not significant In contrast, the consistently significant coefficients for wmexe suggest that a higher presence of female executives in the boardroom correlates with an increased effective tax rate Additionally, the role of chairwm shows no significant impact on gaapetr.

Table 4.2: Results of FEM with tax avoidance measured by gaapetr

TAXAVD gaapetr Coef p>|t| Coef p>|t| Coef p>|t|

Llev -.059* 0.019 -.059* 0.019 -.059* 0.020 fasset -.009 0.598 -.010 0.587 -.010 0.572 sga1 240** 0.002 240** 0.002 240** 0.002 cash 034** 0.001 034** 0.002 034** 0.001 const .217** 0.003 216** 0.003 213** 0.004

The findings reveal that merely having women directors in boardroom positions, regardless of their numbers or ratios, does not influence tax avoidance Furthermore, even when women are appointed to leadership roles on boards, there is no correlation with tax avoidance as measured by GAAP ETR However, the coefficients for the variable WMEXEC in models 1, 2, and 3 indicate additional insights.

0.012 and 0.010 (p-value |t| Coef p>|t| Coef p>|t|

CONTROL roa -.435*** 0.000 -.440*** 0.000 -.439*** 0.000 size 012** 0.004 012** 0.006 012** 0.007 mb -.028*** 0.000 -.030*** 0.000 -.029*** 0.000 slev -.007 0.666 -.008 0.587 -.008 0.610 llev -.042 0.448 -.044 0.429 -.044 0.425 fasset 062** 0.006 067** 0.004 065** 0.004 sga1 215 0.299 216 0.296 215 0.293 cash 067*** 0.000 070*** 0.000 069*** 0.000 const .088** 0.003 107*** 0.000 102*** 0.001

The cash effective tax rate is analyzed in a manner akin to the GAAP effective tax rate, utilizing metrics such as return on assets (ROA) and the market-to-book ratio Additionally, larger companies typically incur higher actual cash taxes due to maintaining elevated cash ratios, which enables them to invest more in capital.

Research indicates that top managers in publicly listed companies prioritize GAAP Effective Tax Rates (ETR) and reported earnings (Graham et al., 2011) A low GAAP ETR correlates positively with net income, influencing stock returns and market value This finding aligns with the negative relationship between market value and GAAP ETR illustrated in tables 4.2 and 4.3 Additionally, financial accounting standards often exclude debt factors and managerial bonuses from reported earnings, making these reported figures crucial for tax reporting decisions that corporate boards use for inter-firm comparisons.

Book-tax differences

The proxy book-tax difference (btd) represents the gap between pretax income and taxable income, with a smaller gap indicating lower tax avoidance Regression analysis in Table 4.4 examines the relationship between women on corporate boards and tax avoidance as measured by btd Models 7, 8, and 9 reveal a negative but insignificant effect of women board directors on tax avoidance However, the consistently positive and significant coefficient for women in leadership roles (chairwm) at 0.010 (p-value = 0.000) suggests that female leaders in the boardroom are associated with higher levels of tax avoidance Additionally, the presence of female executive directors does not significantly influence the btd.

Table 4.4: Results of FEM with tax avoidance measured by btd

TAXAVD btd Coef p>|t| Coef p>|t| Coef p>|t|

CONTROL roa 462*** 0.000 462*** 0.000 462*** 0.000 size -.013*** 0.000 -.013*** 0.000 -.013*** 0.000 mb -.002 0.358 -.002 0.367 -.002 0.354 slev -.015** 0.009 -.015** 0.009 -.015** 0.009 llev 030* 0.011 031** 0.009 031** 0.008 fasset -.009 0.440 -.009 0.430 -.009 0.429 sga1 -.244*** 0.000 -.243*** 0.000 -.243*** 0.000 cash -.034** 0.006 -.034** 0.006 -.034** 0.006 const .107*** 0.000 107*** 0.000 107*** 0.000

It is consistent evidence that firms have higher profitability tend to have higher level of tax avoidance Other firms attributes are opposite signs with prediction.

From an investor's perspective, shareholders recognize that tax avoidance can enhance both shareholder benefits and overall firm value The board of directors plays a crucial role in serving shareholders by minimizing tax expenses, thereby boosting net income Consequently, chairwomen who earn shareholder trust and drive higher firm value are likely to pursue strategies that reduce tax liabilities However, a growing disparity between book income and taxable income, encompassing both temporary and permanent differences, raises concerns about the potential for excessive tax avoidance.

Summary results

Table 4.5 summarizes the research findings, indicating that women's participation in boardrooms generally leads to a reduction in tax avoidance, particularly when they hold leadership roles Previous studies have shown that women often enhance firm value to attract investors, which may lead chairwomen to engage in tax avoidance to safeguard the reported value of their firms Conversely, the relationship between executive managers and tax avoidance is more complex; female executives appointed to the boardroom typically oppose tax avoidance and are likely to increase book tax expenses.

The study reveals that various firm characteristics significantly influence tax avoidance, as indicated by the GAAP effective tax rate, CASH effective tax rate, and book-tax differences Firms with higher profitability, measured by ROA and market-to-book ratios, tend to engage more in tax avoidance Conversely, the debt ratio does not show a clear connection to tax avoidance across any metrics Additionally, cash holdings and expenditures on SG&A or fixed assets exhibit negative relationships with tax avoidance Notably, firm size does not correlate positively with tax avoidance, contradicting findings from previous research.

Table 4.5: Summary hypothesis test results

Research questions Sub-hypotheses Results

1 Is participation of female member in boardroom associated with tax avoidance?

H1.1: availability of female directors in boardroom likely reduces tax avoidance

Sign: coefficient of wob in Model 4 is significant and same expected sign with cash effective tax rate

H1.2: increasing number of female directors in boardroom likely reduces tax avoidance

Sign: insignificant coefficients of nowob in every model

H1.3: increasing proportion of female directors in boardroom likely reduces tax avoidance

Sign: insignificant coefficients of womanratio in every model

2 Is chairwoman associated with tax avoidance?

H2: chairwomen in HOSE listed firms and tax avoidance activities have negative relationship

Sign: coefficients of chairwomen in Model 7, 8, 9 are significant but opposite to expected signs with book-tax difference

3 Is female executive in boardroom associated with tax avoidance?

H3: executive female directorship is negative associated with tax avoidance

Sign: coefficients of female executive board members inModel 1, 2, 3 are significant with same predicted signs with GAAP effective tax rate

Conclusions

This study examines the impact of gender diversity in boardrooms on corporate tax avoidance, utilizing panel data from 296 publicly traded firms on the HOSE from 2010 to 2016 Employing fixed effects regression, the research investigates the association between female board directors and tax avoidance through three distinct proxies Findings indicate that while the presence of female board directors positively influences the CASH effective tax rate, the overall ratio of women on the board does not significantly affect it Additionally, a notable relationship exists between female executive board directors and the GAAP effective tax rate, suggesting that these executives are less inclined to engage in tax avoidance Conversely, the presence of a chairwoman correlates with a larger discrepancy between pretax book income and taxable income, indicating a higher level of tax avoidance.

Research findings indicate that women's participation in boardrooms can lead to a reduction in overall tax avoidance Notably, chairwomen are positively associated with tax avoidance activities, influencing both temporary and permanent differences Conversely, female executives in boardrooms show a negative association with tax avoidance, impacting only temporary differences These results align with previous studies highlighting that boardroom leadership enhances shareholder rights and benefits, with female executives being less inclined to engage in tax avoidance practices.

Tax avoidance aims to reduce taxable income through accelerated deductions or loss reporting, but this strategy can impact the reported profits of publicly listed firms Consequently, corporate boards must navigate tax planning carefully to avoid negatively affecting income reported to investors, particularly in the context of permanent differences Female board directors, often more risk-averse, typically exhibit less inclination towards tax avoidance strategies based on reported financial taxes and cash taxes paid Conversely, chairwomen of firms listed on the HOSE may align their decisions with other board members to pursue both permanent and temporary income differences, ultimately seeking to enhance shareholder value through higher reported profits.

Implications

Research indicates that female board directors and executive managers engage in less aggressive tax avoidance strategies This finding aligns with previous studies showing that female CFOs are less involved in tax planning and contribute to higher quality financial reporting (Francis et al., 2014).

In 2015, research highlighted a conflict within corporate governance studies, suggesting that board independence leads to better governance outcomes Consequently, the appointment of female executives to boardrooms should prioritize individuals with strong reputations This study serves as a valuable reference for future research on the impact of gender on corporate governance in Vietnam.

Appointing female board directors as chairwomen can provide significant advantages for shareholders by increasing the temporary and permanent differences between book and tax expenses Investors often perceive that female leaders are more effective at enhancing tax avoidance strategies, which can ultimately boost firm value and benefit shareholders Research indicates that having a chairwoman may attract more investments, but it is crucial to carefully evaluate the actual costs associated with tax avoidance.

Shareholder value perspectives prioritize profitability and wealth maximization, emphasizing the need for corporations to earn profits legally and maintain transparency to build trust with investors The inclusion of female board members is seen as a way to enhance shareholder value, alongside a focus on legal business practices that attract long-term investors However, gender is not the sole factor influencing corporate governance; it is essential to consider a range of characteristics, including non-observable traits, to fully understand the diversity in corporate governance practices.

Limitations

Gender diversity in corporate governance and its impact on tax avoidance remains an underexplored area in Vietnam There is a significant gap in theoretical frameworks and prior research for meaningful comparisons Furthermore, existing literature and empirical studies predominantly stem from the contexts of developed countries, leading to an imbalanced analysis.

The equality effect has gained significant recognition across various sectors beyond economics in developing countries throughout Latin America, Africa, and Asia over recent decades It is essential to draw motivation and lessons from the experiences of developed nations to enhance these efforts.

The findings indicate that boardroom diversity impacts overall tax avoidance practices; however, the results may be biased due to the exclusion of long-term contributions and the precarious situations of female board directors, as well as prior tax debts Future research could enhance this study by incorporating the duration of board membership and examining tax avoidance over the long term, potentially utilizing GMM regression methods as suggested by Dyreng et al (2008).

The research utilizes readily available data on board and director demographics alongside firm-level financial information, which only provides a broad understanding of tax avoidance behaviors Furthermore, the documentation from taxpayers often fails to comply with Circular 66, particularly regarding analysis and benchmarking Many firms maintain dual tax books, obscuring internal movements within corporations Listed firms, perceived as healthy, often engage in tax avoidance strategies that primarily involve temporary differences A more thorough analysis of corporate board composition and its impact on reported tax avoidance or evasion, especially in unlisted firms, would be beneficial Unfortunately, there is a lack of public resources detailing firms involved in tax avoidance or evasion.

provides essential insights into international tax strategies and effective supply chain management This guide, published in February 2013, serves as a comprehensive resource for understanding transfer pricing principles, particularly in the context of Vietnam For further details, you can access the full document through the provided link.

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APPENDIX A SELECTED FIRMS LISTED IN HOSE

Table A.1: List of selected firms in HOSE (exclude financial and insurance firms)

Code Industry Code Industry Code Industry Code Industry Code Industry

AAM 4 CLL 6 DTT 4 HOT 8 LDG 3

ABT 4 CLW 7 DVP 6 HPG 4 LGC 3

ACC 4 CMG 8 DXG 3 HQC 3 LGL 3

ACL 4 CMT 8 DXV 5 HRC 1 LHG 3

ADS 4 CMV 5 ELC 8 HSG 4 LIX 4

APC 1 CSV 4 FDC 3 HU1 3 MDG 3

ASM 1 CTD 3 FLC 3 HU3 3 MHC 6

ASP 7 CTI 3 FMC 4 HVG 4 MSN 4

ATA 4 CYC 4 FPT 5 HVX 4 MWG 5

BBC 4 DAG 4 GDT 4 IDI 4 NAV 5

BCE 3 DAH 8 GIL 4 IJC 3 NBB 3

BCI 3 DAT 4 GMC 4 IMP 4 NCT 6

BTP 7 DHM 2 HAI 5 KDC 4 NVT 8

BTT 5 DIC 5 HAP 4 KDH 3 OPC 4

CAV 4 DMC 4 HAX 5 KMR 4 PDN 6

CCI 5 DPM 4 HBC 3 KPF 8 PDR 3

CCL 3 DPR 1 HCD 4 KSA 2 PET 5

CDC 3 DQC 4 HDC 3 KSB 2 PGC 5

CDO 5 DRC 4 HDG 3 KSH 2 PGD 7

CIG 3 DRL 7 HID 3 LAF 4 PIT 5

CII 3 DSN 8 HLG 4 LBM 4 PJT 6

Code Industry Code Industry Code Industry Code Industry Code Industry

PNJ 4 PPI 3 PTL 3 PXI 3 QBS 5

POM 4 PTB 5 PVD 2 PXS 3 QCG 3

PPC 7 PTC 3 PVT 6 PXT 3 RAL 4

RDP 4 SJD 7 TCL 6 TNT 2 VMD 5

REE 3 SJS 3 TCM 4 TPC 4 VNA 6

RIC 8 SKG 6 TCO 6 TRA 4 VNE 3

ROS 3 SMA 5 TCR 4 TRC 1 VNG 8

SAM 4 SPM 4 DC T 3 T SC 5 VNL 6

SBT 4 SSC 1 HG T 3 T YA 4 VOS 6

SC5 3 ST8 5 IC T 7 UDC 3 VPH 3

SCD 4 STG 6 IE T 5 UIC 7 VPK 4

SCR 3 STK 4 TIP 3 VAF 4 VPS 4

SFC 5 STT 6 IX T 3 VCF 4 VRC 3

SFG 4 SVC 5 TLG 4 VFG 5 VSC 6

SFI 6 SVI 4 TLH 5 VHC 4 VSH 7

SGT 3 SVT 4 TMP 7 VHG 1 VSI 3

Table A.2: Explanation of industry classification

2 Mining, quarrying and oil/gas extraction

APPENDIX B CORRELATION MATRIX Figure B.1: Correlation matrix of TAXAVD = gaapetr

| gaapetr wob nowob womanr~o chairwm wmexe roa size mb slev llev fasset sga1 cash

-+ - gaapetr | 1.0000 wob | -0.0435 1.0000 nowob | -0.0120 0.7980 1.0000 womanratio | -0.0187 0.8186 0.9611 1.0000 chairwm | -0.0178 0.3298 0.3836 0.4084 1.0000 wmexe | 0.0091 0.4821 0.6521 0.6282 0.3161 1.0000 roa | -0.1305 -0.0074 0.0245 0.0105 0.0442 0.0388 1.0000 size | 0.0321 0.0512 0.0804 0.0240 -0.0013 0.0304 -0.1582 1.0000 mb | -0.0764 0.0108 0.0924 0.0732 0.1650 0.1206 0.4125 0.0091 1.0000 slev | 0.0972 -0.0018 0.0286 0.0423 0.1283 0.0495 -0.1053 0.0406 -0.0257 1.0000 llev | -0.0026 0.0022 -0.0114 -0.0304 -0.1110 -0.0333 -0.1782 0.3202 -0.1053 -0.1247 1.0000 fasset | -0.1299 -0.0583 -0.0825 -0.0963 -0.0593 -0.0654 0.0841 0.0074 0.0493 -0.1609 0.4175 1.0000 sga1 | 0.0283 0.1041 0.1274 0.1043 0.2155 0.1301 0.2502 -0.2084 0.3726 0.1427 -0.2565 -0.0496 1.0000 cash | -0.0399 -0.0548 -0.0503 -0.0678 -0.0330 -0.0532 0.4544 -0.0860 0.2038 0.0129 -0.0611 -0.0688 0.2656 1.0000

Figure B.2: Correlation matrix of TAXAVD = cashetr

| cashetr wob nowob womanr~o chairwm wmexe roa size mb slev llev fasset sga1 cash

-+ - cashetr | 1.0000 wob | 0.0136 1.0000 nowob | 0.0222 0.7950 1.0000 womanratio | 0.0105 0.8172 0.9606 1.0000 chairwm | 0.0189 0.3316 0.3862 0.4138 1.0000 wmexe | 0.0084 0.4828 0.6531 0.6299 0.3153 1.0000 roa | -0.1004 -0.0137 0.0191 0.0071 0.0353 0.0337 1.0000 size | 0.0861 0.0505 0.0783 0.0214 0.0096 0.0313 -0.1563 1.0000 mb | 0.0218 0.0128 0.0920 0.0751 0.1637 0.1193 0.4146 0.0040 1.0000 slev | 0.0513 -0.0000 0.0290 0.0431 0.1185 0.0491 -0.1039 0.0448 -0.0177 1.0000 llev | -0.0597 -0.0014 -0.0104 -0.0318 -0.1248 -0.0325 -0.1743 0.3345 -0.1176 -0.1430 1.0000 fasset | -0.0274 -0.0624 -0.0787 -0.0944 -0.0843 -0.0641 0.0813 0.0106 0.0364 -0.1830 0.3734 1.0000 sga1 | 0.0899 0.0979 0.1237 0.1013 0.2111 0.1278 0.2428 -0.2098 0.3719 0.1429 -0.2728 -0.0659 1.0000 cash | 0.0259 -0.0591 -0.0550 -0.0708 -0.0396 -0.0567 0.4553 -0.0883 0.2088 0.0081 -0.0660 -0.0835 0.2619 1.0000

Figure B.3: Correlation matrix of TAXAVD = btd

| btd wob nowob womanr~o chairwm wmexe roa size mb slev llev fasset sga1 cash

-+ - btd | 1.0000 wob | 0.0322 1.0000 nowob | 0.0239 0.7960 1.0000 womanratio | 0.0244 0.8182 0.9614 1.0000 chairwm | 0.0499 0.3267 0.3769 0.4055 1.0000 wmexe | -0.0011 0.4831 0.6528 0.6314 0.3161 1.0000 roa | 0.6305 -0.0140 0.0126 0.0013 0.0491 0.0387 1.0000 size | -0.0496 0.0532 0.0819 0.0283 0.0043 0.0340 -0.1604 1.0000 mb | 0.1719 0.0064 0.0797 0.0643 0.1580 0.1156 0.4154 -0.0018 1.0000 slev | -0.1141 -0.0077 0.0142 0.0278 0.1179 0.0418 -0.0956 0.0348 -0.0177 1.0000 llev | -0.0390 -0.0071 -0.0203 -0.0370 -0.1006 -0.0356 -0.1718 0.3294 -0.0982 -0.1348 1.0000 fasset | 0.1133 -0.0640 -0.0761 -0.0932 -0.0618 -0.0670 0.0776 0.0156 0.0558 -0.1656 0.4328 1.0000 sga1 | 0.0096 0.0970 0.1246 0.1022 0.2118 0.1299 0.2472 -0.2183 0.3680 0.1420 -0.2616 -0.0529 1.0000 cash | 0.2335 -0.0651 -0.0603 -0.0759 -0.0330 -0.0552 0.4619 -0.0962 0.2133 0.0217 -0.0592 -0.0569 0.2668 1.000

APPENDIX C MULTICOLLINEARITY TEST TAXAVD = gaapetr

The data presents various metrics, highlighting significant values across multiple categories Notably, the "roa" metric shows a consistent range, with values around 1.58 to 1.64, indicating stable performance The "llev" metric fluctuates between 1.39 and 1.89, suggesting variability in leverage Other key metrics include "wmexe," with values around 1.38 to 1.77, and "mb," which also maintains a steady range "Cash" metrics reflect a consistent performance at approximately 1.37, while "fasset" values hover around 1.27 to 1.33, indicating asset stability The "size" metric shows values between 1.20 and 1.28, and "slev" remains lower, ranging from 1.09 to 1.10 Overall, these metrics provide a comprehensive overview of financial performance and ratios across different categories.

The analysis reveals a range of mean Variance Inflation Factors (VIF) across various metrics, indicating the level of multicollinearity in the data Notably, the woman ratio has a mean VIF of 1.43, while the metrics for wmexe and roa show mean VIFs of 1.69 and 1.57, respectively Other significant values include llev at 1.46 and sga1 at 1.39, highlighting their relevance in the analysis The cash variable maintains a consistent mean VIF of 1.38 across multiple instances, reflecting its stability Additionally, chairwm and fasset present mean VIFs of 1.29 and 1.27, respectively, indicating moderate multicollinearity The size and slev metrics demonstrate lower VIFs of 1.21 and 1.09, suggesting less correlation with other variables Overall, the data underscores the importance of evaluating multicollinearity when interpreting these financial metrics.

APPENDIX D PANEL DATA REGRESSION RESULTS – FEM Figure D.1: FEM regression result of model 1

Fixed-effects (within) regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0203 Obs per group: min = 1 between = 0.0261 avg = 5.3 overall = 0.0150 max = 6

- gaapetr | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Figure D.2: FEM regression result of model 2

Fixed-effects (within) regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0202 Obs per group: min = 1 between = 0.0250 avg = 5.3 overall = 0.0146 max = 6

- gaapetr | Coef Std Err t P>|t| [95% Conf Interval] -+ -

The analysis reveals significant insights into various financial metrics The variable 'roa' shows a negative impact on performance with a coefficient of -0.1449786, indicating a statistically significant effect (p = 0.005) Similarly, 'llev' also exhibits a negative correlation of -0.0594447, significant at the 0.039 level Conversely, 'sga1' demonstrates a positive influence with a coefficient of 0.2396895, significant at p = 0.014 The results highlight the importance of cash flow, with a coefficient of 0.0339472, although it lacks statistical significance (p = 0.288) Overall, the analysis indicates that factors such as return on assets and leverage play crucial roles in financial performance, while selling, general, and administrative expenses positively impact outcomes.

Figure D.3: FEM regression result of model 3

Fixed-effects (within) regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0202 Obs per group: min = 1 between = 0.0244 avg = 5.3 overall = 0.0142 max = 6

- gaapetr | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Figure D.4: FEM regression result of model 4

Fixed-effects (within) regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0429 Obs per group: min = 1 between = 0.0139 avg = 5.3 overall = 0.0154 max = 6

- cashetr | Coef Std Err t P>|t| [95% Conf Interval] -+ -

The analysis reveals significant insights into various financial metrics The woman ratio shows a coefficient of 0.0083, indicating a weak positive correlation The chairwm variable has a coefficient of 0.0043, also reflecting a minimal positive impact In contrast, the wmexe variable presents a coefficient of 0.0105, suggesting a slight positive relationship However, the return on assets (roa) demonstrates a notable negative correlation of -0.1446, significant at the 0.006 level Size impacts the results minimally with a coefficient of -0.0006, while market-to-book ratio (mb) shows a negative coefficient of -0.0134 The leverage variables, slev and llev, indicate weak correlations with coefficients of 0.0035 and -0.0589, respectively The fixed assets (fasset) variable presents a negative coefficient of -0.0101, while selling, general and administrative expenses (sga1) show a positive correlation of 0.2405, significant at the 0.013 level Cash has a coefficient of 0.0336, but is not statistically significant The overall model shows a rho value of 0.3966, indicating that approximately 39.66% of the variance is attributable to unobserved factors.

Figure D.5: FEM regression result of model 5

Fixed-effects (within) regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0412 Obs per group: min = 1 between = 0.0150 avg = 5.3 overall = 0.0142 max = 6

- cashetr | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Figure D.6: FEM regression result of model 6

Fixed-effects (within) regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0410 Obs per group: min = 1 between = 0.0152 avg = 5.3 overall = 0.0149 max = 6

The analysis presents various coefficients and their statistical significance, highlighting key variables in the study Notably, the return on assets (roa) shows a significant negative impact with a coefficient of -0.4388 and a p-value of 0.000, indicating strong evidence against the null hypothesis The market-to-book ratio (mb) also exhibits a significant negative relationship with a coefficient of -0.0293 and a p-value of 0.008 Other variables, such as woman ratio, chairwm, wmexe, size, slev, and llev, display non-significant results, with p-values exceeding the conventional threshold of 0.05 Additionally, the fixed asset ratio (fasset) and selling, general, and administrative expenses (sga1) approach significance, with p-values of 0.071 and 0.098, respectively The overall model indicates a fraction of variance due to unobserved factors, with a rho value of 0.4342, suggesting a moderate correlation within the data.

Figure D.7: FEM regression result of model 7

Fixed-effects (within) regression Number of obs = 1623

Group variable: id Number of groups = 290

R-sq: within = 0.4209 Obs per group: min = 1 between = 0.3361 avg = 5.6 overall = 0.3388 max = 6

- btd | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Figure D.8: FEM regression result of model 8

Fixed-effects (within) regression Number of obs = 1623

Group variable: id Number of groups = 290

R-sq: within = 0.4209 Obs per group: min = 1 between = 0.3370 avg = 5.6 overall = 0.3395 max = 6

The regression analysis reveals significant findings, particularly with the return on assets (roa), which shows a strong positive correlation (coef = 0.4616, p < 0.001) Additionally, the size of the firm negatively impacts the outcome (coef = -0.0134, p < 0.001), while leverage (llev) has a positive influence (coef = 0.0306, p = 0.002) However, variables such as cash and sga1 demonstrate substantial negative effects (coef = -0.0337, p = 0.003; coef = -0.2434, p < 0.001, respectively) The model's consistency is reflected in the rho value of 0.4324, indicating a significant fraction of variance attributed to unobserved factors Overall, these insights underscore the complexities of financial performance determinants.

Figure D.9: FEM regression result of model 9

Fixed-effects (within) regression Number of obs = 1623

Group variable: id Number of groups = 290

R-sq: within = 0.4210 Obs per group: min = 1 between = 0.3365 avg = 5.6 overall = 0.3390 max = 6

- btd | Coef Std Err t P>|t| [95% Conf Interval] -+ -

The F-test results indicate that all u_i coefficients are equal to zero, with an F-statistic of 5.42 and a p-value of 0.0000, suggesting strong statistical significance The model shows a variance fraction (rho) of 0.607, indicating that approximately 60.7% of the total variance is attributable to the u_i component Among the variables analyzed, the return on assets (roa) demonstrates a significant positive effect (coefficient of 0.4615, p < 0.0001), while the woman ratio and size exhibit negative coefficients (-0.0063 and -0.0134, respectively) with significant p-values Additionally, the leverage (llev) variable has a positive coefficient of 0.0306, indicating a significant positive relationship, while the cash variable shows a negative effect (-0.0337) with a p-value of 0.003 Overall, the results highlight the importance of certain financial metrics in the model while indicating areas with less significant impact.

APPENDIX E PANEL DATA REGRESSION RESULTS – REM Figure E.1: REM regression result of model 1

Random-effects GLS regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0116 Obs per group: min = 1 between = 0.0975 avg = 5.3 overall = 0.0427 max = 6

Wald chi2(11) = 42.92 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

- gaapetr | Coef Std Err z P>|z| [95% Conf Interval] -+ -

Figure E.2: REM regression result of model 2

Random-effects GLS regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0122 Obs per group: min = 1 between = 0.0880 avg = 5.3 overall = 0.0397 max = 6

Wald chi2(11) = 40.70 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

The analysis reveals several significant coefficients, particularly for return on assets (roa), which shows a negative correlation at -0.1162 (p = 0.003), indicating a potential decline in performance Market-to-book ratio (mb) also presents a noteworthy negative relationship at -0.0077 (p = 0.037) Furthermore, fixed assets (fasset) demonstrate a significant negative coefficient of -0.0451 (p = 0.006), suggesting an adverse impact on the dependent variable The variable sga1 exhibits a positive influence with a coefficient of 0.1113 (p = 0.010), indicating a beneficial effect The overall model's constant term is significant at 0.2023 (p < 0.001), reinforcing the robustness of the findings Other variables, such as cash and leverage ratios, show no significant effects, with p-values exceeding standard thresholds.

Figure E.3: REM regression result of model 3

Random-effects GLS regression Number of obs = 1532

Group variable: id Number of groups = 290

R-sq: within = 0.0119 Obs per group: min = 1 between = 0.0888 avg = 5.3 overall = 0.0400 max = 6

Wald chi2(11) = 40.70 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

- gaapetr | Coef Std Err z P>|z| [95% Conf Interval] -+ -

Figure E.4: REM regression result of model 4

Random-effects GLS regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0336 Obs per group: min = 1 between = 0.0704 avg = 5.3 overall = 0.0426 max = 6

Wald chi2(11) = 60.54 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

The analysis reveals significant findings regarding various financial indicators and their impact on performance metrics Notably, the return on assets (roa) shows a statistically significant negative effect, with a coefficient of -0.3277 (p < 0.001) Additionally, the market-to-book ratio (mb) exhibits a significant negative relationship (coefficient of -0.0077, p = 0.037), while sales growth (sga1) demonstrates a positive impact (coefficient of 0.1082, p = 0.013) The leverage ratio (llev) also presents a significant negative effect, with a coefficient of -0.0858 (p = 0.005) Furthermore, the model indicates a fraction of variance due to unobserved factors (rho) of approximately 0.2693 Overall, these results underscore the importance of financial metrics in understanding organizational performance.

Figure E.5: REM regression result of model 5

Random-effects GLS regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0323 Obs per group: min = 1 between = 0.0738 avg = 5.3 overall = 0.0427 max = 6

Wald chi2(11) = 59.94 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

- cashetr | Coef Std Err z P>|z| [95% Conf Interval] -+ -

Figure E.6: REM regression result of model 6

Random-effects GLS regression Number of obs = 1524

Group variable: id Number of groups = 290

R-sq: within = 0.0324 Obs per group: min = 1 between = 0.0733 avg = 5.3 overall = 0.0429 max = 6

Wald chi2(11) = 60.01 corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000