Corporate tax aggressiveness and market value of Vietnamese listed firms

Le Quy Duong Article Corporate tax aggressiveness and market value of Vietnamese listed firms Contemporary Economics Provided in Cooperation with: VIZJA University, Warsaw Suggested Citation: Le Quy Duong (2025) : Corporate tax aggressiveness and market value of Vietnamese listed firms, Contemporary Economics, ISSN 2300-8814, VIZJA University, Warsaw, Vol. 19, Iss. 3, pp. 329-338, https://doi.org/10.5709/ce.1897-9254.569 This Version is available at: https://hdl.handle.net/10419/330346 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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Despite extensive academic research on the market capitalization implication of corporate tax aggressiveness in developed markets, papers examining this causal relationship in emerging markets are few and far between. The present article aims to contribute to the extant literature by investigating the impact of corporate tax avoidance on market value in Vietnam. The data sample includes nearly 7,400 firm-year observations from 2009 to 2023. Regression analysis with panel data is employed to assess the influence of corporate tax aggressiveness on firm value of Vietnamese listed firm. Empirical results show that corporate tax avoidance inhibits market value of listed firms. On average, the market capitalization would decrease by around 0.13% if the effective tax rate increases by 1%. Furthermore, financial leverage, firm size, and profitability have significant impacts on firm value. As a result, we propose several recommendations for the Vietnamese government to control tax-aggressive activities and build effective tax administration in the future. 1. Introduction1. Introduction Although tax aggressiveness has been comprehensively investigated in numerous papers, its definition is not universally accepted. According to Bimo et al. (2019), corporate tax aggressiveness or avoidance entails arrangements and transactions that decrease explicit taxes. Following Huang et al. (2018), corporate tax aggressiveness includes various legal activities to reduce a firm's tax liability. Corporate tax is the critical factor that affects a company's management choices, such as dividend policy, financial leverage, and retained earnings. As a result, corporate tax aggressiveness undoubtedly influences a firm's value. However, there are still unanswered concerns about this proposition. Notably, it is currently questionable whether corporate tax aggressiveness promotes or inhibits the market value of a listed company. On the one hand, corporate tax aggressiveness improves future cash flow and reduces tax burden, enhancing firm value (Hasan et al., 2021; Messaoude & Ming-Chang, 2023; Guedrib & Marouani, 2023). On the other hand, tax aggressiveness might negatively affect the firm value due to reputational costs, agency costs, higher costs of capital, and sanctions imposed by the government (Chen et al., 2014; Campbell et al., 2020; Arora & Gill, 2022; McClure, 2023). In a different context, the extant literature does not indicate whether the promoting (or inhibiting) effect observed in developed markets could be extended to Vietnam, an infant and inefficient capital market. Motivated by this research gap, we aim to analyze Corporate Tax Aggressiveness and Market Value of Vietnamese Listed Firms ABSTRACT H26, G32, G10. KEY WORDS: JEL Classification: tax aggressiveness, firm value, emerging stock markets. School of Banking and Finance, National Economics University Correspondence concerning this article should be addressed to: Quy Duong Le, School of Banking and Finance, National Economics University, Room 909, A1 Building, 207 Giai Phong street, Hai Ba Trung district, Hanoi. E-mail: [email protected] Quy Duong Le Primary submission: 13.07.2024 | Final acceptance: 27.05.2025 330 Quy Duong Le 10.5709/ce.1897-9254.569DOI: CONTEMPORARY ECONOMICS Vol. 19 Issue 3 329-3382025 the impact of corporate tax aggressiveness on firm value in Vietnam, an important emerging market in Southeast Asia with unique characteristics compared to developed markets. Firstly, due to numerous compliances and documents required by the tax regulation, Vietnam has a notoriously complicated tax system. Several provisions related to corporate tax are even contradictory. The Ease of Doing Business reports a tax payment index in which Vietnam scores 109 out of 190 nations (World Bank, 2020). Furthermore, the electronic tax service has not been widely applied due to limited equipment, facilities, and internet infrastructure. The complex legal system, as well as incomplete electronic tax services, create favourable conditions for tax aggressiveness. Secondly, in Vietnam, the loss of the state budget through tax avoidance is much more severe compared to developed markets. In 2022, Vietnam's tax revenue accounts for about 15.36% of GDP, while the tax revenue of OECD countries is about 34% (OECD, 2023). Consequently, the amount of national output collected by the government through taxes is low, which has negative social implications. As a result, the reputational expenses connected with tax aggressiveness are likely to have a more noticeable negative influence on firm value in Vietnam. Finally, while the International Financial Reporting Standard (IFRS) is widely applied in neighbouring countries, Vietnam's financial reporting is not based on IFRS principles, leading to manipulation. Hence, this paper is essential for foreign investors who are paying attention to Vietnam, an emerging stock market with unique characteristics. Furthermore, we also propose several vital recommendations for policymakers to make the tax system more efficient. Based on the population of more than 580 Vietnamese listed firms from 2009 to 2023, we perform regression analysis to explore the relationship between corporate tax aggressiveness and firm value. Diagnostic tests show that the fixed-effects model is significant and suitable for the data sample. According to regression results, tax aggressiveness inhibits firm value, irrespective of which ratio is used to measure tax aggressiveness. For instance, if the total or current tax rate increases by 1%, firm value would reduce by approximately 0.13% on average. It aligns with the results reported in several emerging Asian markets, such as China (Chen et al., 2014) and India (Arora & Gill, 2022). However, this result contradicts patterns documented in Western developed markets like the US, France or Japan (Tang et al., 2019; Hasan et al., 2021). While firm size, financial leverage, and profitability are significantly explanatory variables, fixed assets ratio and sales growth play no role in explaining firm value. This paper includes five sections. The literature review and hypothesis development are presented in the next section. The methodology is introduced in Section 3, whereas the empirical results are analyzed in Section 4. Conclusion and recommendations are drawn in the final section. 2. Literature Review and 2. Literature Review and Hypothesis DevelopmentHypothesis Development Since corporate tax might reduce firms’ pre-tax profits by a significant amount, it affects firm value. Several academic researchers focus on the relationship between corporate tax aggressiveness and firm value, leading to two opposing viewpoints. On the one hand, it is evident that corporate tax aggressiveness positively affects firm value. Thanks to corporate tax aggressiveness, the tax burden would be reduced, minimizing the transfer of wealth from the corporation to the government. From an international perspective, Tang et al. (2019) find that listed companies with higher tax aggressiveness exhibit higher market capitalization, especially in the US, France, Japan, and Canada. By avoiding corporate tax, these firms could maximize their net profits, which are used to reinvest and pay dividends to shareholders. Hasan et al. (2021) argue that corporate tax aggressiveness increases future cash flow, enhancing firm value in the US from 1986 to 2016. Additionally, companies engaging in tax aggressiveness tend to invest more, increasing their future performance (Hossain et al., 2022). Based on a data set of 375 Taiwanese listed firms from 20092019, Messaoude and Ming-Chang (2023) report a significantly positive effect of tax avoidance on firm value. According to Guedrib and Marouani (2023), corporate tax aggressiveness could be considered as an investment providing tax savings, leading to an increase in firm value in Tunisian. www.ce.vizja.pl 331 Corporate Tax Aggressiveness and Market Value of Vietnamese Listed Firms This work is licensed under a Creative Commons Attribution 4.0 International License. On the other hand, several studies document a firm value reduction associated with corporate tax avoidance. According to the agency costs theory, investors might be concerned that tax aggressiveness is combined with performance manipulation, lowering firm transparency (Desai & Dharmapala, 2009). Then, the agency costs would arise due to worse conflicts between the board of directors and stockholders. Obfuscatory tax-aggressive activities might lead to a shield for managerial opportunism and the diversion of rents. Implementing tax planning activities also incurs labour, time, and other resources. Furthermore, firms with prominent brands bear significant expenses due to the reputational damage of consumers and suppliers. Using a structural model, McClure (2023) estimates that the non-tax costs of tax aggressiveness, including agency costs and tax audit risk, reduce pre-tax income by around 6.5%. From financial markets, Chen et al. (2014) discover the negative reaction of investors to the disclosure of tax avoidance, which adversely affects firm value. All listed companies must fulfil their tax obligations. Hence, if a firm cannot conceal its tax-aggressive arrangements and transactions, it might face potential penalties imposed by the taxation department (Campell et al., 2020). Tax-aggressive transactions impair corporate reputation, leading to unwanted scrutiny from tax authorities (Austin & Wilson, 2017). From the cost of capital theory, Cook et al. (2017) state that the cost of equity rises with corporate tax aggressiveness. Similarly, bond yields and bank loan spreads increase if firms engage in tax avoidance (Shevlin et al., 2020). Subsequently, the higher cost of equity and cost of debt makes the cost of capital higher, leading to a firm value discount. Examining a universe of approximately 550 listed firms in India between 2009 and 2019, Arora and Gill (2022) document a significantly negative correlation between tax avoidance and firm value. In summary, the existing papers investigating corporate tax aggressiveness's effects on firm value have provided inconsistent findings since they have been carried out in different contexts. Building on the reviewed literature, we predict that the costs of tax-aggressive activities would exceed their benefits. Theoretically, tax aggressiveness could cause agency costs, potential penalties from authorities, adverse reactions from investors, and higher costs of capital. Therefore, the expected hypothesis is: H1: The tax aggressiveness would negatively affect firm value in Vietnam. 3. Methodology3. Methodology 3.1. Data Sample The data sample includes Vietnamese listed companies between 2009 and 2023. Our data sample does not include financial institutions such as commercial banks, insurers, or securities companies since their reporting standards differ from those of non-financial firms. Observations with missing data or negative pre-tax income are also removed. Owing to these filters, an unbalanced panel of 7,338 firm-year observations with 583 published companies is obtained. Accounting data is gathered from FiinGroup, a prominent service supplier Table 1 Sample Distribution Across Years Year Number of firms Year Number of firms 2009 384 2017 522 2010 399 2018 529 2011 407 2019 552 j2012j 409 2020 550 2013 433 j2021j 558 j2014j 458 j2022j 571 j2015j 469 j2023j 583 j2016j 514 332 Quy Duong Le 10.5709/ce.1897-9254.569DOI: CONTEMPORARY ECONOMICS Vol. 19 Issue 3 329-3382025 of financial data in Vietnam (https://fiinx.vn). Table 1 displays the data samples sorted by year. 3.2. Variable Construction Firstly, market capitalization divided by the book value of common equity is used as a proxy for firm value, as Tang (2019) and Hasan et al. (2021) suggested. Market capitalization equals the number of outstanding shares multiplied by the closing stock price at the end of the fiscal year. Secondly, the following ratios are used as the surrogate for corporate tax aggressiveness (Arora & Gill, 2022; Messaoude & Ming-Chang, 2023). The total tax rate equals the total tax expense scaled by the pre-tax income. The current tax rate is the ratio between the current tax expense and the pre-tax income. The tax paid rate is estimated as the tax paid in cash divided by the pre-tax income. The book-tax difference is equal to the pre-tax income minus the taxable income. Since it is unable to collect the actual taxable income of a listed firm, it is calculated as the current tax expense divided by the highest corporate income tax rate. Then, the book-tax difference rate is taken as the ratio of the book-tax difference and total assets. Finally, we added several control variables based on extant literature on tax aggressiveness and firm value (Chen et al., 2014; Tang, 2019; Guedrib & Marouani, 2023). These are the logarithm of total assets (Size), total debt divided by total resources (Lev), the ratio of fixed assets to total assets (Fix), return on total assets (ROA) and increase in net revenue (GrSale). All the variables are defined in Table 2. 3.3. Model Specification To examine the impact of tax aggressiveness on firm value, we run regressions using a panel data methodology. Firm value is the dependent variable, and tax-aggressive ratios are the key explanatory variables: (1) Where: TA (tax aggressiveness) is one of the following variables: TTR, CTR, TPR, or BTR. Control variables include Size, Lev, Fixed, ROA, and GrSale. β0 is the regression constant. β1 reflects the effect of tax aggressiveness, whereas βm reflects the effect of control variables. ε is a stochastic error term. 4. Results and Discussions4. Results and Discussions 4.1. Descriptive Statistics Table 3 provides a detailed summary of the descriptive statistics of all variables. Focusing on firm value as a dependent variable, its mean is 1.473, with a standard deviation of 1.387. On average, the market capitalization of Vietnamese listed firms is approximately 1.5 times their book value of common equity. The means of total and current tax ratios are 0.198, slightly lower than the statutory tax rate of 20%. In contrast, the average tax paid ratio is approximately 18%, indicating that the actual tax paid in cash is less than the accounting tax expenses. Notably, the average book-tax difference rate is 0.012, suggesting that the taxable income is lower than the accounting pre-tax income. This data leads to the conclusion that corporate tax aggressiveness is prevalent in Vietnam. Moving on to the control variables, the mean financial leverage is approximately 0.2, indicating that about 20% of firms’ total assets are financed by debt. The average fixed assets ratio is roughly 23%. Sample Vietnamese companies have an average ROA of nearly 8% and an average sales growth rate of 42.7%. As shown in Table 4, the highest correlation coefficient between the two explanatory variables is only 0.352, and importantly, multicollinearity is not present, ensuring the reliability of our research findings. Although the correlation coefficient between the total tax ratio and the current tax ratio is 0.8, they are not simultaneously explanatory variables. 4.2. Diagnostic Tests Firstly, the Augmented Dickey-Fuller test is employed to check the stationarity of the variables. As displayed in Table 5, all DF statistics are lower than the critical value of -1.403. Therefore, all the variables are constant. Secondly, the Hausman test is performed to select the most suitable model from the fixed-effects and random-effects models. The chi-squared statistics, which are remarkably high at more than 70, with a p-value of 0.000, provide a clear indication www.ce.vizja.pl 333 Corporate Tax Aggressiveness and Market Value of Vietnamese Listed Firms This work is licensed under a Creative Commons Attribution 4.0 International License. Table 2 Variable definition Variables Definition Calculation FV Firm value Martket capitalization / Book value of common equity TTR Total tax ratio Total tax expense / Pre-tax income CTR Current tax ratio Current tax expense / Pre-tax income TPR Tax paid ratio Tax paid in cash / Pre-tax income BTR Book-tax difference ratio (Pretax income-Taxable income)/(Total assets) Size Total assets The logarithm of total assets Lev Financial leverage Total liability / Total resources Fixed Fixed assets ratio Fixed assets / Total assets ROA Return on total assets Net income / Total assets GRSale Sale Growth (Sale_t-Sale_(t-1))/Sale_(t-1) Table 3 Descriptive Statistics Variable Mean Max Min Std. Dev. Observations FV 1.473 25.010 0.050 1.387 7,338 TTR 0.198 0.570 0.000 0.094 7,338 CTR 0.198 0.484 0.000 0.103 7,338 TPR 0.179 0.496 0.000 0.100 7,338 BTR 0.012 0.595 -0.227 0.041 7,338 Size 27.439 33.990 23.381 1.630 7,338 Lev 0.206 0.860 0.000 0.183 7,338 Fixed 0.237 0.978 0.000 0.212 7,338 ROA 0.079 0.812 -0.012 0.075 7,338 GRSale 0.427 46.120 -1.049 6.419 7,338 Table 4 Correlation Matrix FV TTR CTR TPR BTR Size Lev Fixed ROA GRSale FV 1.000 - - - - - - - - - TTR 0.398*** 1.000 - - - - - - - - CTR 0.453*** 0.841*** 1.000 - - - - - - - TPR 0.216** 0.428*** 0.407*** 1.000 - - - - - - BTR 0.585*** 0.544** 0.553*** 0.416*** 1.000 - - - - - Size 0.139*** -0.001 0.009 -0.02* 0.011 1.000 - - - - Lev -0.095** 0.012 0.024** -0.041*** -0.034*** 0.341*** 1.000 - - - Fixed 0.048*** -0.178*** -0.157*** -0.095*** 0.142*** -0.001 0.264*** 1.000 - - ROA 0.347*** -0.219*** -0.203*** -0.166*** 0.364*** -0.16*** -0.352*** 0.039** 1.000 - GRSale -0.021* -0.011 -0.009 -0.034*** 0.004 0.007 -0.021* -0.025* -0.001 1.000 334 Quy Duong Le 10.5709/ce.1897-9254.569DOI: CONTEMPORARY ECONOMICS Vol. 19 Issue 3 329-3382025 that the fixed-effects model is the best fit for the data sample. Finally, we check the assumptions of the panel regressions. The Durbin-Watson and Breusch-Pagan tests are used to check the presence of serial correlation and heteroskedasticity. As reported in Table 6, auto-correlation is absent since the DW statistics are always close to 2. The p-value of the BreuschPagan tests is always higher than 0.05, implying heteroskedasticity is not a serious problem. 4.3. The Effect of Tax Aggressiveness on Firm Value Table 6 shows the regression analysis results using the fixed-effects model. From a statistical perspective, corporate tax aggressiveness and control variables explain approximately 60% of the variation in Vietnamese firm value during 2009-2023. Since the F-statistics are incredibly high, at more than 80, the model is significant and provides reliable regression results. Table 6 presents the regression results of the effect of tax avoidance on Vietnamese firm value. It's crucial to note that tax aggressiveness has a significant negative impact on firm value, regardless of the tax-aggressive ratios. The book-tax difference ratio, in particular, has the highest impact, with a 1% increase resulting in a 0.141% decrease in firm value. Similarly, a 1% rise in the total tax rate or current tax rate leads to an average reduction of roughly 0.13% in listed firm value. The effect of the tax-paid ratio on firm value is the lowest, with a significant estimated coefficient of -0.093. Therefore, hypothesis H1 is confirmed, implying that corporate tax aggressiveness negatively affects the Vietnamese firm value. These findings corroborate the hypothesis suggested by Chen et al. (2014) and Arora and Gill (2022). From the theory of agency costs, obscure tax-aggressive activities such as income conversion, price transfer, and capital thinning are considered financial statement manipulation, lowering firm transparency. Then, managers are likely to participate in wealth expropriation, offsetting tax avoidance benefits. Furthermore, due to herding behaviour (Nguyen & Vo, 2024), numerous Vietnamese investors negatively overreact to disclosing tax-aggressive activities. Consequently, shares of listed firms engaging in tax avoidance are oversold, leading to a substantial decrease in market value. More importantly, because Vietnam is an infant and inefficient capital market, stock prices might be pushed below their intrinsic values over a period of time. Therefore, corporate tax aggressiveness has a significantly negative impact on firm value in Vietnam, consistent with results reported in other Asian emerging markets. In China, Chen et al. (2014) report that a decrease of 0.25% in the market capitalization is associated with an increase of 1% in the book-tax difference. In India, if the book-tax difference ratio rises by 1%, the market value of equity decreases by roughly 0.156% (Arora & Gill, 2022). Furthermore, several control variables significantly affect firm value, as shown in Table 6. Firm size positively affects firm value, with significant estimated coefficients of approximately 0.2. Thanks to precious assets, large companies could more easily raise loans from the capital market, reducing their cost of debt. Big firms could achieve optimal capital structures, take advantage of tax shields, and then maximize their market value. In an emerging market like Vietnam, individual investors consider a vast listed firm a visible and attractive investment, leading to a high demand to purchase its shares. Hence, firm size promotes firm value, as documented by Tripathi et al. (2024). Financial leverage and profitability also have positive effects on firm value. These control variables' estimated coefficients are considerably high, at around 0.13 and 0.23, respectively. There are both advantages and disadvantages to using financial leverage. On one side of the coin, interest expenses are tax deductible, increasing tax savings and firm value. On the other side, an excessive debt ratio might imply default risk if the firm cannot meet principal and interest payments. As shown in Table 3, the average financial leverage of Vietnamese listed firms is only about 20.6%. Vietnamese firms are likely to maintain financial leverage at a balanced level, which positively affects their market value. It is consistent with the results of Nguyen et al. (2020). According to Nguyen et al. (2023), profitability is an essential index that Vietnamese investors use to make their investment decisions. The higher the profitability, the more attractive the listed firm. www.ce.vizja.pl 335 Corporate Tax Aggressiveness and Market Value of Vietnamese Listed Firms This work is licensed under a Creative Commons Attribution 4.0 International License. Table 5 The Augmented Dickey–Fuller Test Results FV TTR CTR TPR BTR Size Lev Fixed ROA GRSale DF test statistic -2.814 -1.934 -1.828 -2.155 -2.082 -1.577 -1.691 -1.519 -1.608 -1.752 Table 6 The Effect of Tax Aggressiveness on Firm Value Models (1) (2) (3) (4) Constant 0.574*** 0.576*** 0.485** 0.583*** TTR -0.128*** CTR -0.136*** TPR -0.093*** BTR -0.141*** Size 0.205*** 0.207*** 0.204*** 0.205*** Lev 0.137*** 0.141*** 0.134*** 0.127** Fixed 0.083 0.098 0.088 0.098 ROA 0.231** 0.241*** 0.239** 0.244** GRSale -0.001 -0.006 -0.008 -0.007 Adjusted R2 0.598 0.598 0.583 0.584 F-statistic 86.179 86.847 87.169 81.866 DW statistics 1.842 1.875 1.892 1.909 Breusch-Pagan Prob. 0.214 0.204 0.179 0.188 Note: *,**, and *** indicate significance at the 10%, 5%, and 1% levels, respectively. Table 7 Cross-countries Comparative Analysis of Tax Systems Among Eight Developing Countries in ASEAN Corporate tax rate Tax calculation Tax service Regulatory quality Transparent tax regulation IFRS accounting standards Book-tax difference ratio Indonesia 25% Self assessment Electronic -0.28 -0.6 Yes 0.0082 Malaysia 25% Self assessment Electronic 0.55 0.51 Yes 0.0068 Singapore 17% Official assessment Electronic 1.96 1.77 Yes 0.0046 Thailand 30% Self assessment Electronic 0.23 -0.17 Yes NA Philippines 30% Self assessment Electronic -0.06 -0.55 Yes 0.0086 Cambodia 20% Self assessment Manual -0.35 -0.97 No NA Laos 35% Self assessment Manual -0.84 -0.83 No NA Vietnam 20% Self assessment Manual -0.61 -0.74 No 0.012 Note. This table presents a comparative analysis of several developing markets in ASEAN. The corporate tax rate is collected from Syadullah (2015). The Regulatory Quality and Transparent tax regulation are obtained from Tarmidi et al. (2019). While the book-tax difference ratios of Indonesia, Malaysia, Singapore, and the Philippines are collected from Febriana and Rachmawati (2023), the figure for Vietnam is calculated by the author. NA stands for Not Available, and IFRS stands for International Financial Reporting Standard. 336 Quy Duong Le 10.5709/ce.1897-9254.569DOI: CONTEMPORARY ECONOMICS Vol. 19 Issue 3 329-3382025 Consequently, profitability measured by return to assets has a significantly positive impact on firm value. By contrast, there is insufficient data to conclude the effects of fixed assets ratio and sales growth on firm value in Vietnam. Both variables are insignificant at the 5% level. It corroborates the results of Arora and Gill (2022). The Indian firm value is irrelevant to fixed assets and changes in sales. Similarly, in Vietnam, the correlation coefficients between FV and GRSale is close to zero, at only -0.021 (see Table 4). 4.4. Cross-countries Comparative Analysis To identify the unique characteristics of the Vietnamese taxation system, we undertake a comparative analysis among several developing markets in the Association of Southeast Asian Nations (ASEAN), including Indonesia, Malaysia, Singapore, Thailand, Philippines, Cambodia, Laos, and Vietnam. As shown in Table 7, the book-tax difference ratio of Vietnam is significantly higher than other ASEAN countries, suggesting the prevalence of tax aggressiveness in Vietnam. Since the corporate tax rate in Vietnam is considerably lower than in 6 out of 7 other countries, it is not the key reason for tax avoidance. In contrast, three distinctive features might cause tax-aggressive activities. Firstly, the Vietnamese tax service is a manual system for reporting taxable income without electronic tax invoices. Furthermore, with the self-assessment system, taxpayers are responsible for estimating their taxable sales and expenses. Due to this manual selfassessment system, it is difficult for tax authorities to determine a corporation's income accurately. Secondly, the quality of Vietnam's tax policy formulation and implementation is inadequate. Tarmidi et al. (2019) state that Vietnam ranks the second lowest in terms of regulatory quality and transparent tax regulation. The concepts of revenue and expense recognition, inventory valuation methods, and depreciation are complicated and inconsistent among legal documents. Last but not least, the financial statements of Vietnamese firms are not based on the International Financial Reporting Standard (IFRS). It facilitates the manipulation of financial statements for the tax-aggressive purpose. 5. Conclusions and Recommendations5. Conclusions and Recommendations Given the conflicting empirical evidence regarding the value-enhancing role of tax aggressiveness in developed markets, the main aim of this study is to examine the relationship between tax aggressiveness and market value in Vietnam, an important emerging market with unique characteristics. The data sample includes nearly 600 non-financial listed firms between 2009 and 2023, resulting in about 7,500 firm-year observations. The average tax paid ratio is only 17.9%, while the standard statutory tax rate is more than 20%. Furthermore, the average book-tax difference rate is positive, highlighting the prevalence of tax-aggressive activities in Vietnam. As previously discussed, the distinct characteristics of Vietnam's tax system are complex regulations and manual self-assessment tax services. It is difficult for tax authorities to accurately determine a corporation's income and then estimate its taxable income to curb corporate tax aggressiveness in Vietnam. Similar results are documented in China (Xu, 2024) and India (Arora & Gill, 2022). Both economies are in a transition period with imperfect tax collection and administration systems, creating conditions for tax aggressiveness. Recently, they have enhanced tax supervision by imposing accounting and auditing policies as well as building online tax infrastructure. Regression analysis documents that tax aggressiveness negatively affects firm value at the 1% level. This result holds irrespective of which ratio we use to measure tax aggressiveness. On average, the market capitalization would decline by approximately 0.13% when the effective tax rate increases by 1%. The adverse effect of corporate tax aggressiveness on Vietnamese firm values can be explained as follows: Firstly, financial statement manipulation and price fixing are relatively common in the Vietnamese stock market. Due to the opaque nature of tax-aggressive activities, managers have a chance to extract cash flows from the firm, reducing its market value. Secondly, the average tax revenue of emerging economies is about 17% of their GDP, compared to approximately 35% in OECD countries (Panday et al., 2023). As an emerging country, Vietnam obtains low tax revenue, at only 15% of GDP. Therefore, the reputational expenses connected with tax-aggressive activities have a more