Tax Function Influence: The Case of Power and Status
54 Pages Posted: 21 May 2019 Last revised: 16 Jun 2019
Date Written: June 2019
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: Suggested Citation