Abstract

http://ssrn.com/abstract=2252682
 
 

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Corporate Governance, Incentives, and Tax Avoidance


Chris Armstrong


University of Pennsylvania - Accounting Department

Jennifer L. Blouin


University of Pennsylvania - Accounting Department

Alan D. Jagolinzer


University of Colorado - Leeds School of Business

David F. Larcker


Stanford University - Graduate School of Business

February 25, 2015

Forthcoming, Journal of Accounting and Economics

Abstract:     
We examine the link between corporate governance, managerial incentives, and corporate tax avoidance. Similar to other investment opportunities that involve risky expected cash flows, unresolved agency problems may lead managers to engage in more or less corporate tax avoidance than shareholders would otherwise prefer. Consistent with the mixed results reported in prior studies, we find no relation between various corporate governance mechanisms and tax avoidance at the conditional mean and median of the tax avoidance distribution. However, using quantile regression, we find a positive relation between board independence and financial sophistication for low levels of tax avoidance, but a negative relation for high levels of tax avoidance. These results indicate that these governance attributes have a stronger relation with more extreme levels of tax avoidance, which are more likely to be symptomatic of over- and under-investment by managers.

Keywords: Tax aggressiveness, FIN 48, tax avoidance, CEO incentives, corporate governance

JEL Classification: G34, H25, H26, K34, M41

working papers series





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Date posted: April 18, 2013  

Suggested Citation

Armstrong, Chris and Blouin, Jennifer L. and Jagolinzer, Alan D. and Larcker, David F., Corporate Governance, Incentives, and Tax Avoidance (February 25, 2015). Forthcoming, Journal of Accounting and Economics . Available at SSRN: http://ssrn.com/abstract=2252682 or http://dx.doi.org/10.2139/ssrn.2252682

Contact Information

Chris S. Armstrong (Contact Author)
University of Pennsylvania - Accounting Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Jennifer L. Blouin
University of Pennsylvania - Accounting Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-1266 (Phone)

Alan D. Jagolinzer
University of Colorado - Leeds School of Business ( email )
419 UCB
Boulder, CO 80309-0419
United States
David F. Larcker
Stanford University - Graduate School of Business ( email )
Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

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