Tax Benefits of Debt: a Cese of Pakistani Firms

Only available on StudyMode
  • Download(s) : 42
  • Published : May 21, 2013
Open Document
Text Preview
A Project Report
On
Tax Benefit of Debt
A Case of Pakistani Firms
By
Mahjabeen (4426-FMS/MBA/F09)
Saima Mushtaq (4370-FMS/MBA/F09)
A project report submitted to the Department of Accounting & Finance, Faculty of Management Sciences, International Islamic University, Islamabad in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION

(FINANCE)

Faculty of Management Sciences
International Islamic University Islamabad
May 2012
A Project Report
On
Tax Benefit of Debt
A Case of Pakistan’s Firm
By
Mahjabeen (4426-FMS/MBA/F09)
Saima Mushtaq (4370-FMS/MBA/F09)

MASTER OF BUSINESS ADMINISTRATION
(FINANCE)

Submitted To
Dr. Taqadus Bashir

Faculty of Management Sciences
International Islamic University Islamabad
May 2012

Copyright© 2012 by Ms. Mahjabeen and Ms. Saima Mushtaq
All rights are reserved. No part of this project report can be reproduced in any form or any means such as photocopy or electronic media etc. without prior approval of authors.

Dedication
“We dedicate this project to our parents without their patience understanding, support and most of all love; the completion of this project would have not been possible”

Supervisor’s Certificate
This is certified that Ms. Mahjabeen (4426) and Ms. Saima Mushtaq (4370) of MBA-19 have completed their project report entitled “Tax Benefit of Debt” under my supervision. I have checked this report and found it bonafide work of authors.

___________________
Dr. Taqadus Bashir
SUPERVISOR
Lecturer
Faculty of Management Sciences
International Islamic University Islamabad

___________________
Ms. Hameeda Toor
Head of Finance
Faculty of Management Sciences
International Islamic University Islamabad
____________________
Ms. Tasneem Fatima
Chairperson
Faculty of Management Sciences
International Islamic University Islamabad
ACKNOWLEDGEMENT
We are thankful to Almighty Allah who gave us the strength and potential to complete the task which was assigned to us. Then we are thankful to Dr. Taqadus Bashir whose kind behavior and guidance makes it easy to complete this task. We truly acknowledge the cooperation and help extended by our supervisor Dr. Taqadus Bashir Lecturer, Faculty of Management Sciences, IIUI. We are also thankful to our family members and friends whose silent support led us to complete our project.

TABLE OF CONTENTS
1.INTRODUCTION9
OBJECTIVES OF THE STUDY12
2. LITERATURE REVIEW13
3.MATERIAL AND METHODS18
3.1. SELECTION OF VARIABLES18
3.2. THEORETICAL FRAME WORK:22
3.3. Sample Selection Criteria:23
3.4. Sources of Data:24
3.5 Problems in Data Collection24
3.6. Research Methodology:25
4.RESULTS & ANALYSIS27
4.1. DESCRIPTIVE STATISTICS28
4.2. PEARSON CORRELATIONS28
4.3. REGRESSION ANALYSIS30
4.4. COEFFICIENTS (A)31
5. FINDINGS……………………………………………………………………34 6. CONCLUSION………………………………………………………………34 7. BIBLIOGRAPHY……………………………………………………………36 8. ANNEXURE…………………………………………………………………36

TAX BENEFIT OF DEBT
A CASE OF PAKISTAN
ABSTRACT:
Intensive debate is being made on the advantages of debt, this study also attempted to analyze the tax benefit of debt particularly in the case of Pakistan. This research investigated the impact of firm operating income and debt on value of the firm. The sample of 30 firms has taken from Karachi stock exchange 100 index for the period of 2007-2010. In panel data analysis, the study used the pooled regression and correlation coefficient model to find relationship between the variables. It is found that the variables have the strong positive correlation among them and the value of firm is significantly and positively influenced by the firm operating income and debt or tax benefits of debt greatly influence the market value of firm and it is supported theoretically and empirically. Key words: market value of firm, firm operating income, debt

CHAPTER 1
INTRODUCTION
Tax is the compulsory financial obligation imposed by...
tracking img