EXAMINING THE INFLUENCE OF TAX AVOIDANCE ON FIRM VALUE: MODERATING ROLE OF INSTITUTIONAL OWNERSHIP IN THE CONTEXT OF PAKISTAN

Abstract

This study aims to uncover the influential role of tax avoidance on firm value with the moderating role of institutional ownership. Institutional ownership enhances monitoring, which further aligns the interests of management and shareholders for maximizing firm value. The current study treats firm value as a dependent variable, tax avoidance as an independent variable, and institutional ownership as a moderating variable. This study relies on quantitative secondary data, which is collected for 100 non-financial listed firms during the period from 2013 to 2022. Diagnostics tests are used to confirm that data is free from any error and obeys all basic assumptions of the classical linear regression model. The study's findings present that tax avoidance relates negatively to the firm's value in non-financial firms. Moreover, the result also unveils that institutional ownership acting as a moderating variable has the least positive influence on a firm's value. This means institutional investors increase checks and balances, compelling management to make wise and nice decisions to maximize firm value.