The Relationship between Family Firms and Tax Avoidance: A Quantile Regression Approach

Abstract

The study examined whether firms that are family-owned avoided more taxation in contrast to the firms that are not owned by families. The study’s sample consisted of non-financial firms listed on the Pakistan stock exchange during the period of 2011 to 2020. The quantile regression approach was used to find the results. The findings showed that firms that were owned by families engaged more in avoidance of tax activities as compared to the other firms. The problems of tax avoidance in the family businesses can be explained mainly because of the agency issues. Additionally, the study also utilized the firm-specific characteristics which were the age of the firm, liquidity, leverage and size. It was found that the firm characteristics variables exhibited a significant influence over the avoidance of tax. The study’s findings have important implications for companies and policy makers in order to address the tax avoidance problem.