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3 Equation (3) describes some of the determinants of corporate tax avoidance 0.34 0.172Tax_haven + 0.043Ind_Directors 0.082Log (Total_assets) (0.161) (0.055) ETR = (0.008) (0.027) +0.06Age
3 Equation (3) describes some of the determinants of corporate tax avoidance 0.34 0.172Tax_haven + 0.043Ind_Directors 0.082Log (Total_assets) (0.161) (0.055) ETR = (0.008) (0.027) +0.06Age -0.0026 (Tax_haven x Total_assets) (0.07) (0.0016) n = 526; R = 0.64 (3) Where: ETR: the ratio of tax expenditures over the earnings before tax and takes values between zero and one. The lower the ETR the higher the level of tax avoidance for a corporation. Tax_haven: Binary variable that takes the value 1 if a firm has subsidiaries at tax haven countries and zero otherwise. Ind_Directors: The number of external independent directors on the board of directors. Total_assets: The amount of total assets of a firm. Age: the age of a corporation. 3.1 Run an overall significance test to examine the appropriateness of the above model. Describe and explain each part of the test and formulas you are going to use for this test. Is the model of eq. (3) overall significant at the 5% level? (35%) 3.2 Given eq. (3), propos
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