Strategy, tax planning and liquidity constraints in investment funds

Abstract

Purpose The purpose of this paper is to analyze the effect of the interaction between liquidity constraints and tax planning on the performance of Brazilian investment funds, since liquidity constraints reduce precipitated withdrawals, allowing tax planning operationalization. Design/methodology/approach The sample of this study is comprised of 8,008 Brazilian multimarket funds, considering the period from January 2004 to September 2017. The authors considered tax planning, lockup periods and minimum balance of investment as independent variables, and the authors used the Sharpe ratio as a proxy for performance. To test the study hypothesis, the authors employed regression models with panel data. Findings The main findings indicate some evidences that investment funds which implement, at the same time, liquidity constraints with tax planning have an extra risk-adjusted return index. This result can represent a premium registered by investment funds with have enough resources to achieve competitive advantage. Nevertheless, the result for the main hypothesis was not robust to different forms of performance measurement. Originality/value This study promotes an interaction between finance and organizational strategy, since it employs aspects of strategy theories to support the implications that the internal resources of investment funds, such as their liquidity constraints and tax planning, may exert on their performance. In addition, this study advances by providing new evidences about liquidity constraints in investments funds, which have the potential to contribute with the operationalization of strategy and tax planning of funds’ managers.

Rasio Keuangan dan Arus Kas sebagai Prediktor Pembagian Dividen di Indonesia

“…Pajak merupakan perencanaan yang sangat penting dalam keputusan keuangan (Malaquias & Martins Borges Junior, 2019). Dari beberapa pengertian pajak yang telah diuraikan, maka dapat penulis simpulkan bahwa pajak adalah iuran wajib rakyat kepada negara yang bersifat memaksa dan tidak mendapat jasa imbalan yang langsung digunakan untuk membiayai pengeluaran-pengeluaran negara.…”

Evaluation of investment funds through different performance measures

“…The results indicated that investment funds that implemented, at the same time, redemption restrictions and tax planning presented higher risk-adjusted return rates. As robustness tests, Malaquias and Borges Júnior (2019) also considered samples composed only of funds with a positive Sharpe ratio and fund rankings ordered by Sharpe ratio. However, the results were not robust for these different performance measures.…”

“…Oliveira Filho and Sousa (2015) point out as the main limitation the possibility of obtaining estimates from negative values, which makes comparisons unfeasible, as the ordering rule may not make logical sense, since funds with higher risk would be classified as better ones. Thus, some studies have opted to exclude funds with a negative Sharpe ratio from the sample when evaluating funds' performance, such as Malaquias and Borges Júnior (2019).…”

“…Malaquias and Borges Júnior (2019) analyzed the effect of the interaction between liquidity constraints and tax planning on the performance of 8,008 Brazilian multimarket GEPROS. Gestão da Produção, Operações e Sistemas, v.16, n. 4, p. 39 -58, 2021.…”