Abstract:

This study takes into consideration a topic less study in the academic literature: the drivers of effective corporate tax rate (ECTR) in the Baltic financial markets. Using a sample of 40 listed companies from Estonia, Latvia and Lithuania stock exchanges we empirically tested the influence of profitability (ROA, ROE and ROIC), indebtedness and  assets composition on ECTR. All the results were comparable with other well-known studies from the literature and seem to support the political cost theory. Additional we deployed other variables such as audit fees, R&D expenses, statutory rate and advertising expenses which highlighted characteristic of the Baltic companies. The results were explained from the perspective of corporate finance.