An-Sing Chen và Phạm Tuấn Anh
Investment Analysts Journal, Vol. 49, No. 1, 16-33, 2020
Abstract: This paper examines firms’ asset volatility across a broad cross-section of publicly traded Taiwanese listed nonfinancial firms and its relationship with effective tax rate and equity volatility under the capital structure framework. By analysing the leverage effect hypothesis of firms under the asymmetric diagonal VECH-GJR model, we find both equity volatility and asset volatility do not show the asymmetric effect. In the context of equity volatility dynamics, financial leverage turns from being negatively related to equity volatility to being positively related to equity volatility when the model adds asset volatility as a control variable. Moreover, lower equity volatility is found to be associated with higher effective tax rates.