Tax planning in Norwegian private equity-backed companies : do Norwegian PE-backed companies engage in tax planning activities to a larger extent than their peers, and do PE-firms operating in Norway actively look for target companies that hold a potential for tax optimization?

摘要

We investigate whether Norwegian PE-backed companies engage in tax planning activitiesto a larger extent than their peers, and if PE-firms operating in Norway actively look fortargets that hold a potential for tax optimization, by utilizing five proxies for tax planning.Our results show that Norwegian PE-backed companies exhibit significantly larger leverageratios than comparable companies. The PE-backed companies’ leverage ratios are onaverage 100.82 percentage points higher than the ratios of non-PE-backed companies. Thisindicates that PE-backed companies engage in tax planning activities to a somewhat largerextent than their peers, by generating debt tax shields. We do although see limitations tothis result, as we have not included holding company debt of the peer companies in oursample, and as we cast doubt over the relevance of using Leverage Ratio as a proxy for taxplanning. In addition to this, none of the four other proxies for tax planning we investigatedisplay significant differences between the tax planning activities performed in PE-backedcompanies and comparable non-PE-backed companies. This result is very different fromthe findings in similar studies performed on American and Finnish data, and indicates thatNorwegian PE-backed companies are much less tax aggressive than similar foreigncompanies. Our research also shows that PE-firms operating in Norway do not deliberatelyseek out target companies that hold a potential for tax optimization, as there exist nodifferences in the level of tax planning activities in PE-Target companies and comparablenon-PE-backed firms.