Tax-avoidance Effect on Investment Inefficiency: An Examination of Agency Theory

T. K. Ajmal, Vinod Kumar and Balasubramanian G.

Journal of Emerging Market Finance, 2025, vol. 24, issue 1, 63-86

Abstract: Tax-avoidance activity in firms potentially increases investment inefficiency, arguably due to agency problems in firms. Further, this relationship shows country-wide variation. Using the data of 336 Indian firms from 2011 to 2021, this article examines the tax avoidance and investment efficiency relationship in the Indian context. It also provides empirical evidence for the agency argument on the tax avoidance-investment efficiency relationship. Estimates using the two-step system generalized methods of moments approach show that tax avoidance in Indian firms is positively associated with investment inefficiency, and the agency problem augments this relationship. The findings have significant policy implications for policymakers and firms. JEL Codes: G30, G32, G34

Keywords: Tax avoidance; agency problem; corporate governance; investment inefficiency; India (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/09726527241271488 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:24:y:2025:i:1:p:63-86

DOI: 10.1177/09726527241271488

Access Statistics for this article

More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().