Impact of Corporate Tax Avoidance and Philanthropy on Investment Efficiency. Evidence from Pakistan.

Abstract

Purpose- The purpose of such a study is to investigate the impact of corporate tax avoidance and philanthropy on investment efficiency in Pakistani firms.

Study Design/Methodology/Approach - The study's population comprises companies listed on the Pakistan Stock Exchange. A sample of 88 companies that are listed on the Pakistan Stock Exchange was used in the study. This study covers a period comprising 11 years from 2011 to 2021 by using panel data analysis. In this study, secondary data was collected and analyzed through Ordinary Least Squares (OLS). The OLS estimator is most appropriate to analyze panel data.

Findings- The findings reveal a considerable link between corporate tax avoidance, corporate philanthropy, and investment efficiency. It implies that companies will have to make higher philanthropic and tax payments. According to the findings, investment efficiency encourages managers to use corporate tax avoidance to combat tax avoidance practices.

Practical Implications—We emphasize the special contribution that corporate philanthropy makes to increasing investment efficiency and the managerial ramifications of this practice.

Originality/Novelty - The current study is the first to focus on links between corporate tax avoidance, corporate philanthropy, and investment efficiency in Pakistan. Corporate tax avoidance, investment efficiency, and corporate philanthropy all address the unique dynamics and problems of the country while offering significant value and fresh perspectives. This research may support Pakistan's economic growth and sustainable development by bettering corporate practices, policies, and socioeconomic outcomes.