Beyond the Bottom Line: Exploring the Role of Governance Mechanisms in Promoting Corporate Tax Responsibility

Anwar, Waqas; Hasan, Arshad; Nakpodia, Franklin

Abstract

Purpose
Because of growing corporate tax scandals, there is an enhanced focus on corporate taxation by governments, institutions and the general public. Transparency in tax matters has been identified as critical for effectively managing and promoting socially responsible tax behaviour. This study aims to explore the impact of ownership structure, board and audit committee characteristics on corporate tax responsibility (CTR) disclosure.

Design/methodology/approach
This research collected data from the annual reports of Pakistani-listed firms over 12 years, from 2009 to 2020. Consequently, the data set encompasses a total of 1,800 firm-year observations. This study uses regression analysis to test the relationship between corporate governance and CTR disclosure.

Findings
The results show that board gender diversity, managerial ownership and audit committee independence promote tax responsibility disclosure. In contrast, family board membership, CEO duality, foreign ownership and family ownership negatively impact tax responsibility disclosure. Additional analyses reveal the specific information categories that produce the overall effects on tax responsibility disclosure and assess the moderating impact of family firms on the governance and CTR disclosure nexus.

Practical implications
Corporations can use the results to encourage practices that enhance transparency and improve the quality of disclosures. Regulatory authorities can use the findings to stipulate better protocols. Doing so will be vital for developing countries such as Pakistan to improve tax revenue and cultivate economic growth.

Originality/value
While this research represents, to the best of the authors’ knowledge, one of the first empirical investigations of the association between corporate governance and CTR, the results contribute to the corporate governance literature and offer fresh insights into CTR, an emerging dimension of corporate social responsibility.

Citation

Anwar, W., Hasan, A., & Nakpodia, F. (2024). Beyond the Bottom Line: Exploring the Role of Governance Mechanisms in Promoting Corporate Tax Responsibility. Corporate Governance, 24(6), 1472-1496. https://doi.org/10.1108/CG-09-2023-0392

• Journal Article Type: Article
• Acceptance Date: Mar 2, 2024
• Online Publication Date: Apr 2, 2024
• Publication Date: Aug 27, 2024
• Deposit Date: Mar 11, 2024
• Publicly Available Date: Apr 2, 2024
• Journal: Corporate Governance
• Print ISSN: 1472-0701
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 24
• Issue: 6
• Pages: 1472-1496
• DOI: https://doi.org/10.1108/CG-09-2023-0392
• Public URL: https://durham-repository.worktribe.com/output/2324688