Managerial Ability and Tax Aggressiveness

China Accounting and Finance Review, 24(1)

43 Pages Posted: 2 Nov 2013 Last revised: 18 Apr 2022

See all articles by Bill Francis

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Xian Sun

Johns Hopkins University - Carey Business School

Chia-Hsiang Weng

National Chengchi University (NCCU) - Department of Accounting

Qiang Wu

Hong Kong Polytechnic University - School of Accounting and Finance

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Date Written: November 1, 2013

Abstract

We find a negative relationship between managerial ability and tax aggressiveness. The result is robust to a wide range of measures of tax aggressiveness, inclusion of firm fixed effects, and the use of a difference-in-differences approach using information regarding CEO turnover to control for endogeneity. Further tests show that this negative relationship is more pronounced for firms with higher investment opportunities or firms with more reputational concerns. Given the significant costs associated with tax aggressiveness and the negative effect it can have on managerial reputation if discovered, our results suggest that more able managers invest less effort in aggressive tax avoidance activities.

Keywords: Managerial Ability; Tax Avoidance; Tax Aggressiveness

JEL Classification: M40

Suggested Citation

Francis, Bill and Sun, Xian and Weng, Chia-Hsiang and Wu, Qiang, Managerial Ability and Tax Aggressiveness (November 1, 2013). China Accounting and Finance Review, 24(1), Available at SSRN: https://ssrn.com/abstract=2348695 or http://dx.doi.org/10.2139/ssrn.2348695

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Xian Sun

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Chia-Hsiang Weng

National Chengchi University (NCCU) - Department of Accounting ( email )

No. 64, Sec 2
Chih-Nan Road
Wenshan, Taipei
Taiwan

Qiang Wu (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong
5182095596 (Phone)

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