Asian Journal of Research in Banking and Finance
  • Year: 2015
  • Volume: 5
  • Issue: 9

Effect of VAT on the Asymmetric Sensitivity of the Level of Cash Holdings Ratio to Cash Flows (Evidence from Iran)

aAssistant Professor of Accounting, Department of Accounting, Islamic Azad University, Tonekabon Branch, Tonekabon, Iran

bAssistant Professor of Accounting, Department of Accounting, Islamic Azad University, Tonekabon Branch, Tonekabon, Iran

cDepartment of Accounting, Islamic Azad University, Langroud Branch, Langroud, Iran

Online published on 15 September, 2015.

Abstract

This study examines the impact of value added tax (VAT) on the sensitivity level of cash held in cash flows varied. To do so, this, 696 year-companies have been sampled since 2004 to 2011 from the companies listed in Tehran Stock Exchange. In order to increase the degree of confidence to the results of testing hypotheses, the static-panel data method is used and to estimate a trading system, econometrics method of generalized least squares (GLS). Finally, the results show firms with positive impact of VAT on cash flow have sensitivity of cash holdings is negative and with negative impact of VAT on cash flow, sensitivity of cash holdings is positive. In other words, we can note that sensitivity of cash holdings is asymmetric towards cash flow and VAT. That is, negative sensitivity occurs to firms with positive cash flow and VAT and positive sensitivity to firms with negative cash flow and VAT.

Keywords

VAT, Cash Holdings, Cash Flows, Asymmetric Sensitivities, generalized least squares