Acknowledgements

they found out that there are differences such as GDP growth, capital market development

Bas et al. [35] also investigated capital structure in emerging markets. They examined the capital structure in 25 countries from different regions. It should be noted that according to their study listed companies that prefer equity financing instead of long-term debt financing. They also investigated the effect of company size. Large companies are more diversified and default risk is reduced as a result of higher leverage. Hence, small and large companies have different debt policies. Also, large and traded companies can easily get access to finance that

Jong et al. [36] examined the importance of country and firm-specific factors in the leverage choice of companies from 42 countries. They found that the impact of several firm-specific factors (tangibility, company size, growth and profitability) on cross-country capital structure

According to the studies mentioned above, the capital structure in emerging markets is determined, in addition to factors similar to those in developed countries, by specific factors. These include the development of the capital market, inflation or the size of businesses [37]. The weak development of the capital market, especially bond market, means that the company cannot take advantage of the possibility of issuing a bond. Therefore, it is not possible to determine the market value of debt, and market value-based theories of the tax shield cannot be applied. Within the models reviewed in the chapter, we can suggest the use of models with a book value of debt because they are suitable for all businesses, regardless of size and

In addition to debt value used (market versus book); it is also questionable to estimate the cost of capital (discount factor). For example, the cost of equity is traditionally estimated by CAPM model. However, if the company is non-listed, the model is inappropriate or inaccurate. Also the weighted average cost of capital is difficult to quantify. Damodaran [37] has created the database

The tax shield is also affected by the tax system and corporate and personal tax rate or loss

Under the conditions of emerging markets, the tax shield represents a significant source of value and is therefore part of several methods of investment decision analysis. Leasing is a frequent form of financing for small and medium enterprises; net advantage to leasing model includes an analysis of interest and depreciation tax shields; value of tax shield may be a decisive factor for selecting a portfolio of investment projects (using a modified resource-constrained project scheduling problem with discounted cash flows). In addition, other methods of investment decision-making may be adjusted for the existence of a tax shield, like risk analysis [41–44].

The chapter deals with the analysis and classification of selected approaches to the quantification of tax shields. Theories are based on the premise of the perfect capital market and a clearly

to help estimate the cost of equity and debt. In addition, a build-up model is often used.

carried forward, which affects the effective tax rate and tax burden [38–40].

depends more on the economic conditions of the country.

40 Financial Management from an Emerging Market Perspective

is significant and consistent with conventional theories.

tradability of a company on the capital market.

and inflation rates.

5. Conclusion

The chapter is an output of the science project VEGA 1/0428/17 Creation of New Paradigms of Financial Management at the Threshold of the 21st Century in Conditions of the Slovak Republic.
