The Influence of Board Attributes on Tax Avoidance and Firm’s Performance

Abstract

The latest research on tax avoidance indicates that the number of female directors on a board increases the accounting accuracy and company performance by decreasing tax avoidance. The empirical research illustrates that women’s higher risk aversion and more conservative characteristics are key for company decision-making, especially when considering a tax strategy. We posit that the risk avoidance of women and other board attributes that enhance diversity influence the company’s sustainability through their effects on the company’s taxpaying activities. To verify this relationship, an empirical analysis was conducted using data for the period from 2009 to 2025 for the non-financial enterprises listed on the Pakistan Stock Exchange. The results showed that enhancing diversity on the board by attributes such as gender inclusion paves the way for firms to achieve firm performance. The results showed that tax avoidance partially mediates the relationship between corporate board attributes and firm performance. Effective board diversity encourages firms to engage in more tax-paying activities, which leads to positive firm performance. The research outcomes strengthen the existing proof of the link between board diversity and company financial performance, with tax avoidance behavior serving as an intervening factor. This also provides insights for policy-making authorities, encouraging them to make tax-related regulations that better promote long-term growth and prosperity. This study fills a gap in the research by highlighting the influence of board diversity on tax avoidance behavior and corporate financial performance.

1. Introduction

As Benjamin Franklin (Brown, 2020) once noted, “in this world, nothing can be said to be certain, except death and taxes”. Since the inception of tax laws, almost every society has faced the issue of tax avoidance (Uadiale, 2010), and tax avoidance has become a major concern for economies in the modern world (Salhi et al., 2020). Taxes consume a substantial portion of firms’ pretax profits, reducing the amount available for distribution to shareholders and encouraging firms to minimize their taxes (Annuar et al., 2014). Taxes are considered a major cost for most companies (Gaaya et al., 2017), with a single company’s overall expenses potentially accounting for one-third of its pretax earnings (Kovermann & Wendt, 2019). For this reason, businesses work to reduce their tax burden. Tax avoidance is one strategy companies use to minimize their taxes. While it often serves the interest of shareholders and stakeholders, it prevents the government from collecting its main revenue (Chen et al., 2010). In contrast, it may cause heavy cash penalties and reputational losses for the firms. Legitimate tax avoidance can increase both after-tax income and cash flow.

Tax avoidance is defined as engaging in tax planning activities that minimize taxable income or tax responsibilities, as described by Lanis and Richardson (2018). It involves tracking and manipulating transactions to reduce tax liability in such a way that is in conflict with the policy or spirit of government law (Bird & Davis-Nozemack, 2018). This type of conflict significantly costs shareholders in financial and non-financial terms such as reputation and goodwill. Armstrong et al. (2015) argued that tax avoidance is a risky project. Corporate boards are representative of the shareholders to protect their interest and do monitoring for all types of projects such as tax avoidance. The existing literature highlights that the board attributes such as gender diversity, independence, board diligence and expertise are strongly associated with firm performance and risk management. The existing literature explored the role of board attributes and firm performance (Bunyaminu et al., 2025; Velte, 2025) and tax avoidance (Yahaya et al., 2026; Lanis et al., 2021) but the results remained mixed. This might be true because either the studies checked the direct effect of board attributes on tax avoidance or on firm performance. Therefore, this study is an attempt to answer the important question and gap “Does board attributes matters for the firm performance through tax avoidance?” The consequences of tax avoidance are an unexplored area of research because, when firms decide to avoid taxes, it has a positive or negative effect not only on the firm’s performance but also on the stakeholders.

Among different board attributes, gender diversity got significant attention because it is widely acknowledged that the presence of females in corporate boards brings more transparency, stakeholders interest protection and risk management. Yuan et al. (2023) asserted that board diversity matters for the internal and external performance of the firm. The productivity of the firm can increase, depending on the board’s activity. Similarly, board independence also plays a critical role in tight monitoring, which discourages the tax avoidance behavior of the firms (Armstrong et al., 2015; Shaukat Malik et al., 2025). It is argued that independent directors are certainly effective in protecting the stakeholder’s interest and reducing the agency issues (Yahaya et al., 2026). Effective board governance is dependent on the board diligence (i.e., number of meetings), which shows the board’s seriousness towards risky decisions such as tax avoidance (Ikelegbe et al., 2025). The existing literature highlighted the positive role of board financial expertise to firm value and tax avoidance (Lanis et al., 2021; Yahaya et al., 2026).

Corporations in emerging markets are normally viewed as having weak management practices. Key governance mechanisms and the extent to which board diversity can improve management practices become particularly important for these economies (Jiang & Wen, 2020). Due to this weak governance mechanism, scholars such as (Bhat et al., 2018; Ullah et al., 2020; Murtaza et al., 2021) focus on developing countries like Pakistan but the mixed results demand more research with different angles. This study differentiates from the existing literature by taking tax avoidance as a mediating variable between corporate board attributes and firm performance. Grounded through agency theory, a board of directors are making good decisions to enhance the firm’s performance directly and indirectly. Tax avoidance is a strategic decision reflecting a positive outcome (increase in the value) and potential agency issues (cash penalties and reputational loss) that demand serious attention from the directors to get the desired outcomes.

Pakistan is an emerging nation where ethical and legal issues relating to firm corporate board governance and tax affect the interests of stakeholders. Major taxes are contributed to the national exchequer by listed firms; however, these firms also face compliance issues. Under the adopted governance system, firms avoid some taxes, which can generate either a positive or negative outcome for stakeholders. Hence, how corporate board governance affects the interests (monetary and non-monetary) of stakeholders needs to be examined, especially regarding tax avoidance.

This study will contribute to the existing literature in multiple ways. First, to the best of the author’s knowledge, this is first study considering board attributes and firm performance by taking tax avoidance as mediating. Secondly the study will increase investors’ understanding on corporate tax avoidance and its potential cost. It will help them to understand the role of different board attributes and their effects on corporate tax avoidance policies. Thirdly, the study supports the securities and exchange commission reforms on corporate board formulation and diversity. Finally, the study will enhance the corporate board’s attributes and firm performance literature by contributing from a Pakistani perspective.

2. Literature Review

Based upon a review of the relevant literature, the following theories support the research objectives: Jensen and Ruback (1983) state that business governance is the structure used to resolve agency issues. Firm managers arrange tax strategies and, if the managers choose a tax avoidance level that differs from the owners’ wishes, there may be an agency dispute (Kovermann & Wendt, 2019). As per agency theory, if a strong internal control system with efficient monitoring and aligned incentives is intact, the agency problem will be minimal, and tax policies would be arranged as per the owners’ desire. If a strong board is not in place, the probability of an agency problem is high, and there will likely be a dispute between the tax avoidance level chosen by managers and that required by owners. Desai and Dharmapala (2006) theorized that managers’ rent removal and corporate tax avoidance complement each other because the firm’s structure is set to avoid corporate tax, which will enable managers to follow their own interests rather than those of the owners.

Stakeholder theory (Freeman, 1984) discusses safeguarding the interests of all stakeholders and not just shareholders, as executives owe all stakeholders. The company’s social conduct contributes to its prosperity (Walsh, 2022), and the health of the organization improves when attention is paid to all stakeholders (Attanasio et al., 2022; Marcon Nora et al., 2023). Banerjee et al. (2022) and Mhlanga (2022) asserted that catering to the interests of stakeholders has increasingly affected firms’ daily actions because academic and professional debates on stakeholders have continued to develop over time. Rakia et al. (2023) asserted that, from a stakeholder perspective, the interactional outcome of board attributes such as female participation on the board and social engagement diminishes tax avoidance.

2.1. Board Diversity and Organizational Performance

The board of directors has a considerable and favorable effect on the performance of companies with limited resources, according to Zona et al. (2018). A firm’s financial success is influenced by the composition of the board, reported by the existing literature, such as (Duru et al., 2016). Existing studies have examined different effects of gender balance on boards; Yarram and Adapa (2021) reported that having three or more females positively influences the environmental performance of the company. The education, age, gender, and tenure of board members are all demographic parameters that heavily influence decision-making (Kagzi & Guha, 2018). Martinez-Jimenez et al. (2020) examined the connection between the percentage of female directors in Spanish agricultural and food cooperatives and their influence on firms’ financial performance and reported a positive relationship between gender diversity and firm performance. In contrast, Ajaz et al. (2020) asserted that there was a poor association between gender equality and organizational effectiveness. Yuan et al. (2023) asserted that the governance mechanism matters for both the internal and external performance of the firm. The productivity of the firm increases, depending on the board’s activity. Hence, the following hypothesis is proposed:

H1. 

Board gender diversity significantly and positively affects a firm’s performance.

In relation to the board attributes, a significant amount of the literature highlighted the role of independent board on the firm performance. Amin et al. (2022) defined board independence as the number of directors that have no significant affiliation with the company other than their status as board members. The ability of boards to function as efficient oversight bodies depends on their independence from the administration (Beasley, 1996). As a gauge of board independence, researchers have concentrated on the proportion of independent directors to executives (Peasnell et al., 2005). In a small number of earlier studies, independent directors were suggested to be effective controllers, due to their lack of financial interest in the business or emotional ties to management (Boo & Sharma, 2008); hence, they can more accurately and impartially contest decisions (Klein, 2002; Abbott et al., 2004). According to Bedard and Johnstone (2004), having board members who are independent results in higher scrutiny of the controlling process. Businesses that are more sustainable tend to have more diverse boards of directors and separate roles for the chair and CEO. Independent board directors may facilitate decision-making through their knowledge from different industries. Hence, we propose the following hypothesis:

H2. 

Board independence significantly and positively affects a firm’s performance.

Board diligence, as measured through the frequency of board meetings, is of great importance because it determines the efficiency of the board. It is expected that all the board members attend the board meetings because, through board meetings, directors remain well informed regarding the company policies and development (Eluyela et al., 2018). The existing literature highlighted the link between board diligence and firm performance, but results remained mixed. Eluyela et al. (2018) studied the board diligence and banking performance of Nigeria. They concluded that there is a positive relationship between board diligence and banking performance. Francis et al. (2012) document that a board with less meetings is likely to perform poor compared to those having more board meetings. In contrast, Johl et al. (2013) document the opposite relationship between board diligence and firm performance. They argued that quantity of the board meetings does not matter but the quality of the meetings. Additionally, the role of board of directors’ expertise is equally important to the tax avoidance issue. The existing literature highlighted the role of board expertise and firm performance. Lee et al. (2024) document that directors’ expertise positively influences the firm’s performance.

H3. 

Board diligence significantly and positively influences the firm’s performance.

H4. 

Board expertise significantly and positively influences the firm’s performance.

2.2. Tax Avoidance in Relation to Board Attributes and Organizational Performance

Corporate tax avoidance (CTA) is described as a company’s practice of applying legal methods or utilizing tax gaps to minimize the amount of tax due to the company (Dowling, 2014; Prebble & Prebble, 2009), relative to its pre-tax accounting revenue (Christensen et al., 2015). Companies can swiftly alter their tax status (Kim & Im, 2017) by incorporating accounting activities related to taxation in their financial system regularly. The role of board is critical to monitor tax avoidance strategies due to their risk of tax avoidance. Qawqzeh (2023) asserted that boards have a beneficial effect, reducing tax evasion. Xiao and Xi (2023) stated that stakeholders’ attributes may be a major motivator for enterprises’ active tax evasion. Most of the empirical research that has examined the impact of different board features on tax avoidance (Barros & Sarmento, 2020) has shown mixed results. For instance, Jarboui et al. (2020) studied 300 UK firms and documented that there is a negative relationship between gender diversity and tax avoidance. In contrast, Hossain et al. (2025) reported there is no relationship between board gender diversity and tax avoidance. Armstrong et al. (2015) document that there is a negative relationship between board independence and tax avoidance. Lanis and Richardson (2018) document having more independent directors leads to lower tax avoidance. Benkel et al. (2006) document that an independent board promotes transparency in the firm’s reporting. Ikelegbe et al. (2025) studied the relationship between board diligence and tax avoidance. They concluded that there is a negative relationship between board diligence and tax avoidance. In the same line Egbunike et al. (2021) reported the positive relationship between board diligence and tax avoidance in the Nigerian context. Yahaya et al. (2026) document that the results of the board expertise and tax avoidance are mixed. There is evidence showing no relationship between board expertise and tax avoidance (Amri et al., 2023) and others reported a negative relationship, such as (Deslandes et al., 2020). Therefore, we hypothesize the following:

H5. 

Gender diversity on the board is significantly and negatively related to corporate tax avoidance.

H6. 

Board independence is significantly and negatively related to corporate tax avoidance.

H7. 

Board diligence is significantly and negatively related to corporate tax avoidance.

H8. 

Board expertise is significantly and negatively related to corporate tax avoidance.

Watts and Zimmerman (1986) document that publicly traded firms’ managers internationally reported lower earnings to reduce the political cost, as governments used the accounting information for tax purposes. Tax has a significant role in shaping the firm’s decisions, as it significantly influences the business cost and profitability of the firms. Tax-related expenses compel firms to explore various practices, sometimes legal and illegally (Amri et al., 2023). In the legal world, they explore different loopholes to avoid taxes (Salehi et al., 2024). Both individuals and firms try to explore the ways to manage taxes, as in (Desai & Dharmapala, 2006). Given that corporate board plays a significant role in a company’s strategic decision making, board attributes carry a significant role in the realm of tax avoidance. Li et al. (2021) found boards play a critical role in the transparency of the company directly and indirectly. For example, it is evident that firms with greater board independence tend to exhibit more transparency; this transparency discourages opportunistic behaviours such as tax avoidance (Salehi et al., 2024).

Having clarified the relationship between board attributes and tax avoidance, it is quite important how such tax strategies impact the firm value through a stakeholder’s lens. Stakeholder theory (Freeman, 1984) and its expanded version by Freeman and Phillips (2002) reported that a firm’s success is linked with the firm’s ability to manage the relationship with different stakeholders. Therefore, board attributes should not only increase the transparency and legal compliance but respect for the tax regulations to protect the stakeholder’s interest in the long run. The strong monitoring and diverse board attributes may help firms to align their financial planning and decrease tax avoidance. This strategic alignment not only improves tax efficiency but also the firm value. Exploring the mediating role of tax avoidance on the board attributes and firm performance is quite important in the Pakistani context. There are few studies that examine the role of tax avoidance as mediating, such as Obiedallah and El Mahdy (2025), where they reported that tax avoidance partially mediates the relationship between accounting conservative firm practices and firm value. Considering the above discussion we hypothesize that:

H9. 

Corporate tax avoidance intervenes in the relationship between board attributes (gender diversity, board independence, board diligence and board expertise) and firm performance.

3. Material and Methods

3.1. Data and Sample

This study is explanatory in nature, with organizations as the unit of analysis. The study considered all the listed companies on the Pakistan stock exchange except financial companies because of their different reporting methods and corporate governance codes. A purpose sampling was employed to select 62 firms with complete and consistent data on all variables for the time span of (2009–2025). There was a reason to select 2009 because the government of Pakistan introduced major capital gain taxes during 2010. This approach ensures the representation of all sectors while maintaining the data integrity for panel data estimation. The study used secondary data taken from different sources; data for board attributes are taken from annual audited financial reports available on firms’ websites and State Bank of Pakistan archive. The data for companies’ financials are taken from State Bank of Pakistan listed firms financial statement analysis available publicly.

3.2. Variables

Firm performance was used for the outcome variables. The nature of this variable is a ratio and measurement of the variable is presented in

Table 1. Variables’ description and measurement.

Variable	Measurement	Nature	Sources
Board gender diversity (BGD)	Ratio of the number of females on the board to the overall size of the board	Independent	(Amin et al., 2022; Yarram & Adapa, 2021)
Board independence (BID)	Ratio of independent directors to all other directors	Independent	(Khaoula & Ali, 2012; Lanis & Richardson, 2018)
Board diligence (BDIL)	The number of board meetings held during the year	Independent	(Ilaboya & Obaretin, 2015; Eluyela et al., 2018)
Board expertise (BE)	Dummy variable if the directors have financial expertise or not	Independent	(Faleye et al., 2018; Wang et al., 2015)
Return of Assets (ROA)	Ratio of net income to total assets	Dependent	(Lisowsky, 2010; Lanis & Richardson, 2018)
Tax avoidance (ETR)	Effective tax rate (ETR)	Mediating	(Aronmwan & Okaiwele, 2020; Graham et al., 2014)
Firm age (FAGE)	Number of years it has operated	Control	(Boone et al., 2007)
Firm size (FSIZE)	Total amount of Assets	Control	(Guluma, 2021)

. Board attributes (gender diversity, board independence, board diligence and board expertise) are taken as independent variables. Gender diversity and board independence are ratio variables while board diligence is number, and board expertise is a dummy variable. The measurement and description of these variables is explained in Table 1. Tax avoidance is taken as a mediating variable, and its nature is a ratio variable, as presented in Table 1. The study considers few variables such as firm size and firm age. Firm size plays a vital role in the firm’s performance because larger firms have more agency issues and need stronger monitoring (Guluma, 2021). Firm age is the number of years it has operated; it is acknowledged that firms with a long history accumulated experience that resulted in better performance (Boone et al., 2007).

3.3. Model and Technique

Using the above variables, the following panel regression models using OLS were used to extract the causal outcomes. Before applying the models, proper diagnostics were tested to obtain unbiased outcomes. Simultaneous equations were applied to explain the intervening effect.

$$Performanc{e}_{\mathrm{i},\mathrm{t}}={\beta }_0+{\beta }_{1}BG{D}_{\mathrm{it}}+{\beta }_{2}BIN{D}_{\mathrm{it}}+{\beta }_{3}BDI{L}_{\mathrm{it}}+{\beta }_{4}BE{P}_{\mathrm{it}}+{\beta }_{\mathrm{n}}CONTROLS+e_{\mathrm{it}}$$

(1)

$$ET{R}_{\mathrm{i},\mathrm{t}}={\beta }_0+{\beta }_{1}BG{D}_{\mathrm{it}}+{\beta }_{2}BIN{D}_{\mathrm{it}}+{\beta }_{3}BDI{L}_{\mathrm{it}}+{\beta }_{4}BE{P}_{\mathrm{it}}+{\beta }_{\mathrm{n}}CONTROLS+e_{\mathrm{it}}$$

(2)

$$Performanc{e}_{\mathrm{i},\mathrm{t}}={\beta }_0+{\beta }_{1}ET{R}_{\mathrm{it}}+{\beta }_{\mathrm{n}}CONTROLS+e_{\mathrm{it}}$$

(3)

$$Performanc{e}_{\mathrm{i},\mathrm{t}}={\beta }_0+{\beta }_{1}BG{D}_{\mathrm{it}}+{\beta }_{2}BIN{D}_{\mathrm{it}}+{\beta }_{3}BDI{L}_{\mathrm{it}}+{\beta }_{4}BE{P}_{\mathrm{it}}+{\beta }_{5}ET{R}_{\mathrm{it}}+{\beta }_{\mathrm{n}}CONTROLS+e_{\mathrm{it}}$$

(4)

4. Results

Table 2. Descriptive statistics.

Variable	Obs	Mean	Std. Dev	Min	Max
ROA	992	0.16	2.312	−1.21	0.62
BGD	992	0.08	0.102	0	4
BIND	992	0.23	0.871	0	6
BDIL	992	0.32	1.836	0	15
BE	992	1.02	0.162	0	1.5
FSIZE	992	6.32	0.65	0.251	9.32
FAGE	992	9.12	0.15	3	35

shows the descriptive statistics of the studied variables. The average ROA stood at 0.16, which is good, and board gender diversity 0 at minimum and maximum is 4, which is good enough in the case of Pakistan. Females’ participation in the corporate boards is emerging, but it is still behind the developed world.

The correlation results are presented in

Table 3. Pairwise correlations.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
BGD	1	0.32	0.25	0.28	0.15	0.05	0.20	−0.18
BIND	0.32	1
BDIL	0.25	0.22	1
BE	0.28	0.18	0.12	1
FSIZE	0.15	0.10	0.08	0.10	1
FAGE	0.05	0.08	0.05	0.03	0.40	1
ROA	0.20	0.12	0.18	0.25	0.30	0.15	1
ETR	−0.18	−0.10	−0.12	−0.15	0.20	−0.18	−0.45	1

. All the corporate board attributes showed positive correlation with the firm’s performance while negative with corporate tax avoidance. All the correlations are within the acceptable limit and less than 0.70.

To test the H1, H2, H3, and H4 we ran the panel regression and results are presented in

Table 4. Panel regression results (dependent variable: firm performance ROA).

Variable	Pooled	Fixed Effects	Random Effects
BGD	0.021 *** (3.45)	0.018 ** (2.56)	0.020 *** (3.12)
BIND	0.015 ** (2.21)	0.012 * (1.89)	0.014 ** (2.05)
BDIL	0.009 (1.32)	0.007 (1.10)	0.008 (1.25)
BEXP	0.017 ** (2.67)	0.014 * (1.98)	0.016 ** (2.40)
FSIZE	0.025 *** (4.12)	0.019 *** (3.28)	0.022 *** (3.75)
FAGE	0.006 (1.45)	0.004 (1.12)	0.005 (1.30)
Constant	−0.112 ** (−2.10)	—	−0.095 * (−1.85)
Year	Yes	Yes	Yes
Observations	992	992	992
R2	0.38	0.31	0.35
F-statistic	18.45 ***	12.32 ***	16.88 ***

T-statistics in parentheses, *** 1%, ** 5%, * 10% level of significance.

. To select the random and fixed effects we ran the Husman test, and the p-value (0.004) suggests the use of fixed effects. Overall explanation power of the model is 0.31, which is quite high and acceptable and the model is highly significant. We found that board gender diversity positively affects the firm’s performance. This implies that having more females in corporate boards increases the firm value as (0.018 **, 2.56). The results are consistent with the existing literature (Yarram & Adapa, 2021). The study contradicts Mumtaz et al. (2021)’s argument that gender diversity in corporate boards negatively influences the firm performance in the Pakistani context. Therefore, we accept our H1. Board’s independence shows a significant and positive influence on the firm’s performance but at 10% level of significance as (0.012 *, 1.89). This shows that board independence increases the firm value, tightening monitoring and consistent with the existing literature as (Klein, 2002; Abbott et al., 2004). The results show that board diligence does have a positive influence on the firm’s performance but remained insignificant (0.007, 1.10). The results are consistent with the existing literature, such as Alshabibi et al. (2026) where they reported a positive but insignificant relation between board diligence and firm performance. The board’s expertise showed positive and significant influence on firm performance at 10% level of significance (0.014 *, 1.98). This shows that having board members will assist firm tax planning and reduce agency problems with the stakeholders. Among control variables, it was found that firm size is significantly positive with the firm’s performance as expected. Furthermore, the firm age is also reported as a statistically positive influence but at 10% level of significance.

To test the H5 to H8, we ran corporate board attributes against the corporate tax avoidance and results are presented in

Table 5. Mediation analysis.

Variables	ETR
BGD	−0.028 *** (−3.90)
BIND	−0.019 ** (−2.45)
BDIL	−0.010 (−1.40)
BEXP	−0.022 ** (−2.75)
FSIZE	−0.031 *** (−4.20)
FAGE	−0.008 (−1.60)
Constant	0.245 *** (5.10)
R2	0.29

T-statistics in parentheses, *** 1%, ** 5%,level of significance.

below.

The results showed that board gender diversity negatively influences tax avoidance, which leads to the acceptance of H5. This shows that having more females in the corporate boards brings more transparency to the firms and reduces the agency issues by discouraging the tax avoidance. As expected, the results show that board independence has negative influence on corporate tax avoidance. Results are consistent with the existing literature (Ikelegbe et al., 2025) and support the agency view that having more outsider directors resulted in better monitoring and protection of the stakeholders. Board expertise also showed the negative influence on tax avoidance, which leads to acceptance of the H8. The board diligence showed negative but insignificant relationships as (−0.10, −1.40). Control variables showed very interesting results that size and age influence tax avoidance, which contradicts (Askenberg & Isaksson, 2018).

To test the H9, the full path analysis is presented in

Table 6. Mediation analysis (dependent variable: ROA).

Variable	ROA
BGD	0.015 ** (2.30)
BIND	0.010 * (1.75)
BDIL	0.006 (0.95)
BEXP	0.012 * (1.85)
ETR	−0.082 *** (−4.50)
FSIZE	0.021 *** (3.50)
FAGE	0.004 (1.20)
Constant	−0.085 * (−1.70)
R2	0.42

T-statistics in parentheses, *** 1%, ** 5%, * 10% level of significance.

.

To check the mediation analysis, we used step-by-step regression-based mediation analysis. First, we tested the direct relationship framework presented in Table 4. Next we followed stepwise relationship effects of independent variables on the mediating variable and then effect on the mediator with the outcome variable. The results show that tax avoidance partially mediates the relationship between corporate board attributes (board gender diversity, board independence, board diligence and board expertise) and firm performance. The results confirm Obiedallah and El Mahdy (2025) where they reported the partial mediation of tax avoidance. The results confirm that board attributes bring more transparency, experience and protection to stakeholders. The results also confirm firms taking care of the stakeholders got positive returns in the long run, as mentioned by Freeman (1984). To check the robustness of the results we employed the GMM and results are presented in

Table 7. GMM regression.

Variables	Coefficient
L.ROA	0.412 *** (6.20)
BGD	0.013 ** (2.15)
BIND	0.009 * (1.78)
BDIL	0.005 (0.88)
BEXP	0.011 * (1.95)
ETR	−0.075 *** (−3.95)
FSIZE	0.018 *** (3.10)
FAGE	0.003 (0.90)
Observations	928

T-statistics in parentheses, *** 1%, ** 5%, * 10% level of significance.

.

The robust results showed that board gender diversity remained positive and significant, which is aligned with the fixed effects results. Overall significance of the variables remained the same as observed in the fixed effects regression.

5. Discussion

Examining the mediating role of tax avoidance on the corporate board attributes and firm performance in the emerging economy of Pakistan is intriguing. There is a strand of the literature that examined the role of corporate board attributes and firm performance in corporate tax avoidance (Fariha et al., 2022; Bennouri et al., 2018; Hoseini et al., 2019), but the literature on the indirect role of tax avoidance is scarce and not explored in the Pakistani context.

The study results showed direct and positive influence on the firm’s performance, which shows firms with more diverse boards are beneficial for the firm’s performance. H1 to H4 examined the direct effect of corporate board attributes on the firm’s performance and all variables showed significant influence except board diligence. This is consistent with the existing literature and shows that board diverse attributes enhance the firm’s transparency and provide better protection to the stakeholders such as Fariha et al. (2022). They concluded that board gender diversity leads to lower tax avoidance. In the same line Limpaphayom (2015) reported the same results that more gender-diverse boards positively influence the firm’s performance. The study contradicts Tanwer (2026) who documents an inverse relationship between gender diversity and firm performance in the Indian context. H5 to H8 reported that board attributes discourage tax avoidance. This behavior protects the stake of stakeholders and increases the firm’s performance. The results are consistent with the existing literature such as Armstrong et al. (2015), where they reported that having more females and independent directors can mitigate the agency issues, which leads to better firm performance.

The study offers many practical implications that companies may formulate their corporate boards inviting more females and independent directors, which will not only comply with the Pakistani corporate governance codes but also reduce the agency issues among the firms. Secondly the research shows that tax avoidance can be managed with the diverse board attribute, which improves the company’s financial performance directly (as positive ROA) and also indirectly through the goodwill of paying high taxes.

The major results are consistent with the expectations of the stakeholders proposed by stakeholder theory. The code of corporate board formulation of Pakistan demands that the government implement policies that enhance the tax culture. Emerging markets face issues of governance and tax avoidance. The results of the listed firms of Pakistan assert that the studied board attributes, except for the frequency of meetings, increase prosperity. They also increase the effective tax rate, which leads to a decrease in tax avoidance.

6. Conclusions

This study aimed to highlight the influence of diverse attributes of the board of directors on the performance of the organization. ROA is used to measure the performance of the firms. We evaluated the data for the non-financial firms listed on the Pakistan Stock Exchange. Pakistan is an emerging economy facing various political, economic, and social issues, one of which is taxation. As the highest source of revenue for the government of Pakistan, tax avoidance is a serious issue. We examined how tax avoidance is affected by board attributes and company performance.

The findings of this study are summarized as follows: Firstly, the direct effects of the board’s gender diversity, independence, and expertise on both performance outcomes remained significant and affirmative. However, board diligence influenced performance but insignificantly. Secondly, tax avoidance was reduced significantly by an increase in the board’s gender diversity and expertise. Thirdly, after incorporating the effective tax rate in the final model along with board attributes, the outcome was significant for all variables on performance.

This study contributes to the field as follows: First, measuring the direct effect of female participation on the board, board independence, diligence, and expertise on the financial activities of the firm provides new insights for the theoretical and empirical literature with respect to the emerging economy of Pakistan. Second, this study showed the causal influence of the four dynamic attributes of board on the tax behavior of the firm. Third, the intervening effect on tax avoidance from the influence of females on the board, board independence, diligence, and expertise in terms of the financial activities of the firm sheds light on the behavior of the firm, whether it directly focuses on performance or via adopting a tax avoidance agenda. Fourth, concerned stakeholders (especially the regulatory body and policy-makers) can understand the stimuli for the behavior of a firm, whether in compliance with the regulatory body and the interests of the stakeholders or whether opportunistic.