A STUDY TO DETERMINE THE EFFECTS OF A FIRM'S BEHAVIORAL AND ENVIRONMENTAL PATTERNS ON ACCOUNTING AS IT RELATES TO CORPORATE INCOME TAXES
Chu, Silvie Sai-Wah
The purpose of this study is to determine the effects of a firm's behavioral and environmental patterns on accounting as it relates to corporate income taxes. A firm may choose to report the taxes paid in accordance with the income tax regulations (non-tax-allocation), or to allocate the taxes according to the matching principle (tax-allocation method). In the process of developing the decision patterns, who and what are the most influential factors? It is hypothesized that the behavioral factors (decision-makers, corporate personality) and environmental factors are the main influences in the decision-making process. In order to determine the validity of the hypothesis, literature concerning the behavioral nature of' the corporation, and the relation between environment and organization was examined. A survey has been designed to study the behavioral and environmental variables which might have some influence on the firm's tax policy. The format of the survey follows the same pattern as previous studies done by Sorter. Because of the environmental and financial constraints, the form of mailing questionnaires has been chosen. The questionnaires were sent to 174 Alberta oil companies. The response rate of the survey was fairly satisfactory: 32.5 per cent, or 55 companies, returned both the questionnaires and their annual reports. Among the 55 responding companies, twenty-one of them are tax allocation firms and the other thirty-four are non-allocation firms. The statistical analysis was based on these companies. The Fisher Exact Test, the Chi-square Test, and the Man-Whitney-U Test for the independent samples were adopted to compare the differences between tax allocation firms and non-allocation firms. The result of the analysis was encouraging. Although not all the variables under study are in the predicted direction, in the main the evidence does support the hypothesis that behavioral and environmental factors influence a firm's policy.