Dual Entrenchment and Tax Management: Classified Boards and Family Firms

Posted: 20 Sep 2017

See all articles by Jared A. Moore

Jared A. Moore

Western Washington University

Sang-Hyun Suh

Syracuse University; University of Massachusetts Lowell

Edward M. Werner

Rutgers, The State University of New Jersey

Date Written: June 9, 2017

Abstract

This study examines whether and how multiple managerial entrenchment devices within a firm, specifically the structure of the board of directors and family firm status, interact to influence tax management. Using a sample of 4,000 U.S. public firm-year observations covering the period 1999–2013, we find that the classified board structure and family firm status are both negatively related with tax avoidance. However, accounting for the interaction between board structure and family firm status, we also find that the negative associations between both entrenchment measures and tax management apply only where the other entrenchment mechanism is absent. In further analysis, we find that higher levels of monitoring by institutional investors neutralize the interaction between the presence of a classified board and family firm status. Our evidence highlights that governance/monitoring mechanisms can interact in complex ways, including an offsetting effect between potentially redundant dual-level entrenchment mechanisms, to influence tax management behavior.

Suggested Citation

Moore, Jared A. and Suh, Sang-Hyun and Suh, Sang-Hyun and Werner, Edward M., Dual Entrenchment and Tax Management: Classified Boards and Family Firms (June 9, 2017). Journal of Business Research, Vol. 79, 2017, Available at SSRN: https://ssrn.com/abstract=3039126

Jared A. Moore (Contact Author)

Western Washington University ( email )

Bellingham, WA 98225-9071
United States
360-650-6252 (Phone)

Sang-Hyun Suh

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Edward M. Werner

Rutgers, The State University of New Jersey ( email )

Camden, NJ 08102
United States
(856) 225-6978 (Phone)

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