The Impact of Corporate Governance Mechanism On Tax Planning: Empirical Study of Pakistan’s Chemical and Pharmaceutical Sector

Abstract

This paper aims to investigate the impact of the corporate governance mechanism on corporate tax planning through the size of the board of directors, the dual identity of the CEO, and the institutional type of ownership system. The ETR (Effective Tax rate) of 29 non-financial firms of Pakistan’s chemical & pharmaceutical sector from 2015 to 2019 is used as a proxy for measuring corporate tax planning (tax avoidance). The fixed effect regression model analysis results of 145 observations show that board size has an insignificant relationship with etr (tax avoidance), CEO duality has a negative significant relationship with etr (tax avoidance) and Institutional type of ownership and etr (tax avoidance) are significantly positively correlated with each other. In addition, the results show that the other corporate governance variable i.e. size of the company has a significant impact on etr (tax avoidance).