Abstract

The main purpose of this study is to find the influence of corporate tax rate on systematic risk with three more variables (leverage, return on assets and market value of equity) by using cement sector data of Pakistan. This study used fifteen cement manufacturer data from 2004 to 2009 and fixed effect panel data random regression model. The result showed that corporate tax rate is not a determinant of systematic risk, but showed its effect through leverage, which is having statistically significant relationship with systematic risk. This study showed that leverage had significant influence in determining systematic risk and had positive relationship with systematic risk; whereas return on assets and market value of equity are positively related with systematic risk but had no significant influence on systematic risk. This study investigated the influence of corporate tax rate on systematic risk. This study also presented the managerial and policy related implications and recommendations from the study findings.

Key words: Systematic risk, corporate tax rate, leverage, returns on assets, market value of equity, debt to equity ratio.