Earnings Before Interest and Tax (EBIT) and Capital Remuneration

Authors

Stanislas T. M. D. C. Agossadou, Faculty of Economics and Management (FASEG), University of Abomey-Calavi (UAC), Cotonou, BeninFollow

Author ORCID Identifier

https://orcid.org/0000-0003-0013-778X

Abstract

Background: Earnings before interest and tax (EBIT) is the earnings generated by the corporate investment, irrespective of the source of the corporate financing. EBIT is generally intended not only to remunerate debt capital via interest and equity capital via dividend, but also to cover the corporate income tax (CIT) charge. From this point on, the main research question that arises is this: Isn't CIT the remuneration of a capital?

Objective: This research's overall objective is to estimate the capital whose remuneration is CIT.

Method: The Generalized Least Squares (GLS) method on random‑effect panel data, collected on a sample of one hundred and three firms in the building and public works (BPW) sector in France, over the period 2017 to 2021, was used. It was assumed that there is no free cost or revenue and that the public or taxable capital (TAXITY) used by the firm, subject to CIT, is a straight line debt and equity combination.

Results: We find a strong positive correlation between CIT and TAXITY and significantly estimate the corporate capital tax rate (CCTR) at 1.61%.

Conclusion: The main determinant of CIT has been estimated, namely the positive effect of public capital.

Keywords

Financial integration; Corporate capital tax; Cost of capital; Public capital; Tax capital

Recommended Citation

Agossadou, Stanislas T. M. D. C. (2024) "Earnings Before Interest and Tax (EBIT) and Capital Remuneration," Management Dynamics: Vol. 24: No. 2, Article 5:
DOI: https://doi.org/10.57198/2583-4932.1344
Available at: https://managementdynamics.researchcommons.org/journal/vol24/iss2/5