Tax Avoidance and Financial Policy: Evidence from Corporate Firms

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ID: 334196
2026
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Abstract
The present study examines the effects of tax avoidance on corporate financial decisions by analysing firms that cross traded G20 economies between 2012 and 2022. The concept of tax avoidance is proxied by the effective tax rate (ETR) and the financial policy is measured with the short term leverage and total debt. In the analysis, secondary data from DataStream is used. A fixed-effects model regression model is used to analyze the relationship between these variables using a Hausman test to select the model. The results are also confirmed with robustness by running two-step System Generalized Method of Moments (GMM) estimations and Two-Stage Least Squares (2SLS) estimations. It is found that companies with greater tax avoidance are more leveraged up. This positive association between tax avoidance and leverage holds true across all estimation methods thereby validating the findings. Overall, the study underscores the fact that corporate tax planning has a considerable impact on financing decisions and boosts the reliance on debt capital.
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imported_1793226625_6ae27781a629d Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Abdul Qadir Bhatti, SimSiew Ling, Wong Poh Ming
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Journal Annals of Human and Social Sciences
Year 2026
DOI
10.35484/ahss.2026(7-III)12
URL
https://ojs.ahss.org.pk/journal/article/view/1238
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