Abstract

http://ssrn.com/abstract=2408236
 


 



Overconfidence and Corporate Tax Policy


James Chyz


University of Tennessee

Fabio B. Gaertner


University of Wisconsin - Madison - Department of Accounting and Information Systems

Asad Kausar


Nanyang Technological University (NTU)

Luke Watson


University of Florida - Fisher School of Accounting

August 2015


Abstract:     
Using a sample of firms experiencing exogenous CEO departures, we investigate whether firms with overconfident CEOs avoid more tax. Overconfident CEOs are more likely to overestimate the net benefits from investments in tax planning and thus avoid more tax. Consistent with this prediction we find robust evidence of a positive relation between proxies for corporate tax avoidance and CEO overconfidence. Because our empirical tests use a panel of firm-years with exogenous CEO changes and include controls for stationary firm effects, we are able to isolate the role of an idiosyncratic personality trait (overconfidence) on corporate tax outcomes, thus adding to the literatures on overconfidence and tax avoidance.

Number of Pages in PDF File: 58

Keywords: Overconfidence; tax avoidance; managerial effects

JEL Classification: D80, M40, H25


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Date posted: March 14, 2014 ; Last revised: August 15, 2015

Suggested Citation

Chyz, James and Gaertner, Fabio B. and Kausar, Asad and Watson, Luke, Overconfidence and Corporate Tax Policy (August 2015). Available at SSRN: http://ssrn.com/abstract=2408236 or http://dx.doi.org/10.2139/ssrn.2408236

Contact Information

James Chyz (Contact Author)
University of Tennessee ( email )
Knoxville, TN
United States
865-974-1701 (Phone)
Fabio B. Gaertner
University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )
School of Business
975 University Avenue
Madison, WI 53706
United States
Asad Kausar
Nanyang Technological University (NTU) ( email )
S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore
Luke Watson
University of Florida - Fisher School of Accounting ( email )
Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0208 (Phone)
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