CFO Work Experience and Tax Avoidance: Evidence from China

57 Pages Posted: 1 Dec 2022 Last revised: 2 Oct 2023

See all articles by Panagiotis Karavitis

Panagiotis Karavitis

University of Glasgow - Adam Smith Business School

Pantelis Kazakis

University of Glasgow

Tianyue Xu

University of Glasgow - Adam Smith Business School

Date Written: November 25, 2022

Abstract

We ask whether the general managerial skills that Chief Financial Officers (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 new 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. This index, including a subcomponent for political connections, is particularly appropriate when studying emerging economies that tend to be “relationship-based” rather than “market-based.” 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. Our findings are robust to the inclusion of a comprehensive list of relevant control variables, tackling endogeneity concerns, and to a battery of other sensitivity tests.

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

JEL Classification: G30, H26, J24, M41

Suggested Citation

Karavitis, Panagiotis and Kazakis, Pantelis and Xu, Tianyue, CFO Work Experience and Tax Avoidance: Evidence from China (November 25, 2022). Available at SSRN: https://ssrn.com/abstract=4286164 or http://dx.doi.org/10.2139/ssrn.4286164

Panagiotis Karavitis

University of Glasgow - Adam Smith Business School ( email )

2 Discovery Place, Room 511 Glasgow
G11 6EY
United Kingdom

Pantelis Kazakis (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
2 Discovery Place
Glasgow, Scotland G11 6EY
United Kingdom

HOME PAGE: http://sites.google.com/site/panteliskazakis/home

Tianyue Xu

University of Glasgow - Adam Smith Business School ( email )

Adam Smith Business School
University Avenue
Glasgow, Scotland G12 8QQ
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
167
Abstract Views
992
Rank
325,458
PlumX Metrics