Corporate income tax, asset turnover and Tobin’s Q as firm performance in Pakistan: Moderating role of liquidity ratio

Figures & data

Table 1. Description of variables

Variables	Description
TQ	It is Tobin’s q and measures the financial performance of the firm. Tobin q is a ratio of capital value to the installed replacement cost of the specific firm. It is calculated as a ratio of (book value of assets–book value of equity + market value of equity) to (book value of assets). For example, see Ramadan and Hassan (2022) used Tobin’s q to measure firm performance.
CIT	CIT is the corporate income tax and it shows that CIT rates imposed on the income of the firm. For example, see Arora and Gill (2022) disclose that corporate income tax has an impact on firm value in India. Ahmad et al. (2021) find that effective tax has a significant impact on market price and earning per share of firm in UK.
ATO	ATO is the asset turnover ratio of the firm. It is calculated as: Asset Turnover Ratio = Revenues/Total Assets; where revenues of the firm are the total sales and its total assets include the current asset as well as the non-current asset. For example, see Sitanggang (2013) find that asset turnover has a positive impact on the firm financial performance.
LnVOC	VOC shows the volume of capital. LnVOC is the log of VOC. Volume of capital comprised on the traded shares of firm in the entire market for a certain time period. For example, see Chancharat & Kumpamool (2022) find that working capital increases the Tobin’s q of the firm.
LR	LR is the liquidity ratio of the firm. The liquidity or current ratio of the firm shows the present assets compared with its existing liabilities. It is calculated as: current ratio = existing assets/present liabilities. For example, see Owolabi and Obida (2012) find a positive relationship between liquidity and profitability of manufacturing companies in Nigeria.

Table 2. Summary statistics of variables

Variables	Obs	Mean	Std. Dev.	Minimum	Maximum
TQ	256	0.690	0.233	0.11	1.22
CIT	256	0.277	0.105	0.02	0.69
ATO	256	1.296	1.122	.08	5.51
LnVOC	256	8.475	2.256	4.55	11.26
LR	256	1.563	1.425	0.26	9.66

Note. Authors’ own calculation.

Table 3. Correlation matrix of variables

	TQ	CIT	ATO	LnVOC	LR
TQ	1.000
CIT	−0.073 (0.248)	1.000
ATO	0.332* (0.000)	0.022 (0.723)	1.000
LnVOC	0.270* (0.000)	−0.047 (0.447)	0.098 (0.117)	1.000
LR	−0.536* (0.000)	−0.086 (0.171)	−0.243* (0.000)	−0.061 (0.333)	1.000

*Shows significance of pairwise correlation between variables at P < 0.01.

Note. Authors’ own calculation.

Table 4. Correlated random effect—hausman test

Test summary	Chi- square statistic	P-value
Cross-section random	133.89	0.000

Note. Author’s own calculation.

Table 5. Results of fixed effect model

Variable	Coefficient	St. Error	t-Statistic	P-value	VIF
C	3.612	0.256	14.09	0.000	1.04 (Mean)
CIT	0.069	0.067	1.02	0.307	1.01
ATO	−0.036	0.014	−2.44	0.015	1.07
LR	−0.037	0.005	−6.87	0.000	1.07
VOC	−0.334	0.029	−11.24	0.000	1.01

R²: within = 0.475, between = 0.121, overall = 0.063.

F(4,236) = 53.45, corr(ui, Xb) = −0.969, Prob > F = 0.000.

Note. Author’s own calculation.

Table 6. Moderating role of liquidity ratio

Variable	Coefficient	Standard Error	t-Statistic	P-value
C	3.612	0.253	14.26	0.000
CIT	0.097	0.067	1.43	0.153
ATO	0.007	0.022	0.33	0.745
LR	−0.019	0.009	−2.30	0.022
ATO*LR	−0.040	0.015	−2.60	0.010
VOC	−0.338	0.029	−11.47	0.000

R²: within = 0.490, between = 0.122, overall = 0.063.

F(5,235) = 45.15, corr(ui, Xb) = −0.9700, Prob > F = 0.000.

Note. Author’s own calculation.

Table

Table A1.
Number of non-financial listed companies at Pakistan Stock Exchange during 2020 and 2021
Economic group	2020/2021
1. Textiles	123/119
2. Sugar	27/27
3. Food	19/20
4. Chemicals, chemical products and pharmaceuticals	44/44
5. Manufacturing	38/40
6. Mineral products	9/9
7. Cement	16/17
8. Motor vehicles, trailers and auto parts	20/21
9. Fuel & Energy	21/21
10. Information, communication & transport services	15/16
11. Coke and refined petroleum products	11/11
12. Paper, paperboard and products	9/9
13. Electrical machinery and apparatus	6/6
14. Other services activities	9/9
Total	367/369

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