CFO Work Experience and Tax Avoidance: Evidence from China

Abstract

We ask whether the general managerial skills that CFOs gain from lifetime work experience affect corporate tax avoidance. We use a sample of hand-collected data for Chinese-listed companies to develop and validate a CFO managerial skills index based on four dimensions of CFO work experience: (1) the number of current positions a CFO holds, (2) the number of functional departments a CFO has worked in, (3) the number of firms the CFO has worked for, and (4) whether the CFO has political connections. We find that CFOs with high general managerial skills are more likely to engage in aggressive tax avoidance. This effect is weaker among CFOs who are approaching retirement, are in their first year of employment, or are too busy. Moreover, we find that CFOs with general management skills are more likely to adjust corporate tax avoidance to levels similar to or lower than their peers.

Keywords: Chief Financial Officer (CFO), work experience, managerial skills, tax avoidance

JEL Classification: G30, H26, J24, M41