Managerial Ability and Tax Aggressiveness
64 Pages Posted: 2 Nov 2013 Last revised: 26 Jan 2018
Date Written: November 1, 2013
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: Suggested Citation