The Effects of Executives on Corporate Tax Avoidance

50 Pages Posted: 11 Jul 2008 Last revised: 19 Sep 2012

See all articles by Scott Dyreng

Scott Dyreng

Duke University - Accounting

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Edward L. Maydew

University of North Carolina at Chapel Hill

Date Written: September 9, 2009

Abstract

This paper investigates whether individual top executives have incremental effects on their firms’ tax avoidance that cannot be explained by characteristics of the firm. To identify executive effects on firms’ effective tax rates, we construct a dataset that tracks the movement of 908 executives across firms over time. The results indicate that individual executives play a significant role in determining the level of tax avoidance that firms undertake. The economic magnitude of the executive effects on tax avoidance is large. Moving between the top and bottom quartiles of executives results in approximately an eleven percent swing in GAAP effective tax rates; thus, executive effects appear to be an important determinant in firms’ tax avoidance.

Keywords: Tax avoidance, tax, manager effects, tax aggressive, effective tax rate, cash tax rate

JEL Classification: H25, M41, M43, G30

Suggested Citation

Dyreng, Scott and Hanlon, Michelle and Maydew, Edward L., The Effects of Executives on Corporate Tax Avoidance (September 9, 2009). Available at SSRN: https://ssrn.com/abstract=1158060 or http://dx.doi.org/10.2139/ssrn.1158060

Scott Dyreng

Duke University - Accounting ( email )

Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

Edward L. Maydew (Contact Author)

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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