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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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    File URL: https://mpra.ub.uni-muenchen.de/36800/1/MPRA_paper_36800.pdf
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    References listed on IDEAS

    as
    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. 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.
    3. 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.
    4. Cyrille Schwellnus & Jens 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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    1. repec:rss:jnljfm:v2i3p3 is not listed on IDEAS
    2. repec:rss:jnljfm:v2i2p3 is not listed on IDEAS
    3. repec:rss:jnljee:v4i4p3 is not listed on IDEAS
    4. repec:rss:jnljee:v5i2p4 is not listed on IDEAS
    5. Musiliu 0. Oseni & Michael G. Pollitt, 2013. "The Economic Costs of Unsupplied Electricty: Evidence from Backup Generation among African Firms," Cambridge Working Papers in Economics 1351, Faculty of Economics, University of Cambridge.
    6. repec:rss:jnljef:v4i5p7 is not listed on IDEAS

    More about this item

    Keywords

    Corporate income tax; Firms’ size; Capital investment; Statistical analysis system;

    JEL classification:

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

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