The Effects of Executives on Corporate Tax Avoidance
Massachusetts Institute of Technology (MIT) - Sloan School of Management
Edward L. Maydew
University of North Carolina at Chapel Hill
September 9, 2009
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.
Number of Pages in PDF File: 50
Keywords: Tax avoidance, tax, manager effects, tax aggressive, effective tax rate, cash tax rate
JEL Classification: H25, M41, M43, G30
Date posted: July 11, 2008 ; Last revised: September 19, 2012
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