Impact of Tax Aggressivenss, Earnings Quality, and Pyramidal Structure on Firm Risk-Taking: The Moderating Role of Family Ownership

Abstract

The study investigates the impact of tax aggressiveness, earnings quality, and pyramidal structure on firms risk-taking. Further, it also ascertains the moderating influence of family ownership on the association between tax aggressiveness and firm risk-taking, earnings quality and firm risk-taking, and pyramidal structure and firm risk-taking. The data is based on top 50 non-financial firms according to market capitalization listed on the Pakistan Stocks Exchange (PSX) for the period 2015 to 2023. Based on Hausman test result, the panel data was statistically analyzed using the random effect model. Regression results were further checked for robustness using panel-corrected standard errors (PCSE) and Maximum likelihood Estimation (MLE) methods. Identifying factors that affects firms risk-taking is important to forecast growth and innovation. The study adds value to the existing literature by ascertaining the positive effect of tax aggressiveness and earnings quality on firms risk-taking. It also highlighted a negative effect of pyramidal structure on firm risk-taking. The study also reveals that there is a positive moderation by family ownership on the association between tax aggressiveness and firm risk-taking, and on the relationship between earnings quality and firm risk-taking. Additionally, the family ownership negatively moderates the association between pyramidal structure and firm risk-taking. The study is beneficial for corporate valuation and corporate governance professionals.