Tax Avoidance and Financial Policy: Evidence from Corporate Firms

Authors

  • Abdul Qadir Bhatti PhD Scholar, School of Business and Management, University of Technology Sarawak, Sibu, Malaysia
  • Dr. SimSiew Ling Director of the Centre of Quality Assurance (CQA), School of Business and Management, University of Technology Sarawak, Sibu, Malaysia
  • Prof. Dr. Wong Poh Ming Associate Professor, School of Business and Management, University of Technology Sarawak, Sibu, Malaysia

DOI:

https://doi.org/10.35484/ahss.2026(7-III)12

Keywords:

Corporate Sector Decisions, Finance, Tax

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.

Vol. 7 No. 3 (2026): May to June

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Published

2026-06-04

Details

    Abstract Views: 28
    PDF Downloads: 9

How to Cite

Bhatti, A. Q., Ling, S., & Ming, W. P. (2026). Tax Avoidance and Financial Policy: Evidence from Corporate Firms. Annals of Human and Social Sciences, 7(3), 114–124. https://doi.org/10.35484/ahss.2026(7-III)12

Issue

Vol. 7 No. 3 (2026): May to June

Section

Articles

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Copyright (c) 2026 Annals of Human and Social Sciences

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