Abstract:

This article aims to examine the impact of financial performance and risk on the value of the tax shield. Financial performance and risk were defined as financial indicators; their dependence on the value of the tax shield was examined. We tested the dependence of these indicators on the value of the tax shield; four different methods were used, according to Modigliani and Miller (1963) theory for perfect capital markets, their theory for imperfect capital markets, and the theory of Velez-Pareja (2013,2016) for quantification of the value of the tax shield. The analysis was made by correlation analysis of more than 5,000 Slovak enterprises. These models are created for different economic conditions; therefore, it is necessary to find out how the value of the tax shield responds to changing financial performance indicators. Based on the results, we investigated which model is most suitable for quantifying the value of the corporate tax shield in emerging markets (both traded and non-traded), especially in the Slovak Republic. In conclusion, we examined how the new IFRS 16 will change the value of the tax shield and selected financial indicators affecting the tax shield.