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Strategy, tax planning and liquidity constraints in investment funds

Rodrigo Fernandes Malaquias (Department of Finance, Universidade Federal de Uberlandia, Uberlandia, Brazil)
Dermeval Martins Borges Junior (Graduate Program in Business Administration – PPGA, Universidade Federal de Uberlandia, Uberlandia, Brazil)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 5 August 2019




The purpose of this paper is to analyze the effect of the interaction between liquidity constraints and tax planning on the performance of Brazilian investment funds, since liquidity constraints reduce precipitated withdrawals, allowing tax planning operationalization.


The sample of this study is comprised of 8,008 Brazilian multimarket funds, considering the period from January 2004 to September 2017. The authors considered tax planning, lockup periods and minimum balance of investment as independent variables, and the authors used the Sharpe ratio as a proxy for performance. To test the study hypothesis, the authors employed regression models with panel data.


The main findings indicate some evidences that investment funds which implement, at the same time, liquidity constraints with tax planning have an extra risk-adjusted return index. This result can represent a premium registered by investment funds with have enough resources to achieve competitive advantage. Nevertheless, the result for the main hypothesis was not robust to different forms of performance measurement.


This study promotes an interaction between finance and organizational strategy, since it employs aspects of strategy theories to support the implications that the internal resources of investment funds, such as their liquidity constraints and tax planning, may exert on their performance. In addition, this study advances by providing new evidences about liquidity constraints in investments funds, which have the potential to contribute with the operationalization of strategy and tax planning of funds’ managers.



Rodrigo F. Malaquias would like to thank FAPEMIG for the financial support for this research (Edital de Demanda Universal, 2014, APQ-01265-14).


Malaquias, R.F. and Martins Borges Junior, D. (2019), "Strategy, tax planning and liquidity constraints in investment funds", Journal of Economic Studies, Vol. 46 No. 4, pp. 842-857.



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