Tax Function Influence: The Case of Power and Status

54 Pages Posted: 21 May 2019 Last revised: 16 Jun 2019

See all articles by Matthew Ege

Matthew Ege

Texas A&M University - Department of Accounting

Bradford F. Hepfer

Texas A&M University - Department of Accounting

John R. Robinson

Texas A&M University; Texas A&M University - Department of Accounting

Date Written: June 2019

Abstract

Social hierarchy theory predicts that the power and status of an organizational function affect the influence of the function. We test this theory using the tax function and find that the rank of the title of the top tax executive is positively associated with tax function influence, as captured through multiple measures of tax planning and through tax internal control quality. Using changes in the size of the c-suite as a shock to the relative power and status of the tax function compared to other functions, we find evidence of decreasing (increasing) influence when there are c-suite expansions (contractions). We also find evidence that influence increases (decreases) with promotions (demotions) in title rank. Our point estimates suggest that the position of the tax function within the organization is up to 1.8 times as important as investment in tax planning resources.

Keywords: social hierarchy, power, status, tax function

JEL Classification: H25, L22, M41

Suggested Citation

Ege, Matthew and Hepfer, Bradford F. and Robinson, John R., Tax Function Influence: The Case of Power and Status (June 2019). Available at SSRN: https://ssrn.com/abstract=3375189 or http://dx.doi.org/10.2139/ssrn.3375189

Matthew Ege

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

Bradford F. Hepfer

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

John R. Robinson (Contact Author)

Texas A&M University ( email )

mail stop 4353
Mays School of Business
college state, TX 77843-4353
United States
979-845-3457 (Phone)
979-845-0028 (Fax)

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

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