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Effect of corporate income tax and firms’ size on investment: evidence by Karachi stock exchange

Author

Listed:
  • Raza, Syed Ali
  • Ali, Syed Adeel
  • Abassi, Zia

Abstract

This study investigates to explore the effect of Corporate Income Tax and Firms’ Size on Capital Investment made in tangible assets by the Manufacturing firms belongs to nine non-financial sectors listed in Karachi Stock Exchange. To examine the study Panel financial Data on annual basis has been gathered for the period of six years from 65 sample manufacturing companies. To determine the effect of two predictors as Corporate income tax and Firms’ Size on Fixed investment the results are generated by using multiple regression analysis as a statistical technique with the help of multiple Statistical tools for high accuracy of outcomes. The results conclude that there is a negative relationship exists between corporate income tax and investment while firm size and investment reveals a positive relationship with each other. Therefore, it has been cleared in the light of above results that excess tax obligations in a firm specific sector will discourage corporate investor for investment in it. On the other hand enhancement in firm size as total sales revenue will increase the level of investment in a KSE listed firm and vice versa for developed hypothesis.

Suggested Citation

  • Raza, Syed Ali & Ali, Syed Adeel & Abassi, Zia, 2011. "Effect of corporate income tax and firms’ size on investment: evidence by Karachi stock exchange," MPRA Paper 36800, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36800
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    References listed on IDEAS

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    1. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    2. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    3. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    4. Cyrille Schwellnus & Jens Mathias Arnold, 2008. "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-Country Evidence from the Amadeus Dataset," OECD Economics Department Working Papers 641, OECD Publishing.
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    Cited by:

    1. Tuba DERYA-BASKAN & Eda BALIKÇIOĞLU, 2018. "Firma Bileşenlerinin Halka Açık Perakende Firmalarında Kurumlar Vergisine Etkisi," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(37).
    2. Olaoye Clement Olatunji & Alade Elizabeth Oluwatoyin, 2019. "Effect of Corporate Taxation on the Profitability of Firms in NIGERIA," Journal of Economics and Behavioral Studies, AMH International, vol. 11(1), pages 191-201.
    3. Rebecca Attah-Annor & Alhassan Bunyaminu, 2016. "Effect of Stock Market Dynamics on Economic Growth: Evidence from Ghana Stock Exchange," International Journal of Financial Markets, Research Academy of Social Sciences, vol. 2(3), pages 69-93.
    4. Yaya Keho, 2015. "Institutions, Economic Structure and Tax Revenue in UEMOA Countries: A Pool Mean Group Analysis," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(4), pages 216-230.
    5. Peter A. Oti & Sunday A. Effiong & Egbe Esso Dickson & Iniobong Cletus Rabson & Agbon Egbe Chris, 2016. "Evaluation of the Effect of Personal Income Tax Amendment Act 2011 on Internally Generated Revenue: A Focus on Cross River State of Nigeria," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 5(2), pages 129-138.
    6. Gibson L.K. Daasi & Favour Amarachi Dimoji & Alobari Collins & Zukbee Sira, 2015. "Corporate Governance and Effective Bank Performance in Nigeria," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 4(5), pages 318-323.
    7. Anochie Uzoma C. & Ude Damian Kalu & Chukwu Bonaventure, 2016. "Appraising the Money Market in the Economic Development of Nigeria: Challenges and Prospects," International Journal of Financial Markets, Research Academy of Social Sciences, vol. 2(2), pages 39-50.
    8. Akinleye Gideon T. & Olarewaju Odunayo M. & Fajuyagbe Samson B., 2019. "Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria," Folia Oeconomica Stetinensia, Sciendo, vol. 19(2), pages 7-24, December.
    9. Musiliu O. Oseni & Michael G. Pollitt, 2013. "The Economic Costs of Unsupplied Electricity: Evidence from Backup Generation among African Firms," Working Papers EPRG 1326, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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