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External social networks and tax avoidance

Author

Listed:
  • Chih-Liang Liu

    (National Yunlin University of Science and Technology)

  • Junmao Chiu

    (National Sun Yat-Sen University)

Abstract

We investigate the role of external social networks in corporate tax strategies. Using data on Taiwan-listed nonfinancial firms from 2004 to 2022, we construct executives’ external social networks by measuring their ties with the directors or executives of other listed firms with the similar characteristics of educational backgrounds and working experiences as well as other activities such as training courses, business forums, and meetings. Our empirical analyses show that firms whose CEOs and CFOs have stronger network ties are more likely to aggressively avoid taxes, and such a phenomenon is robust to different regression models. With more insightful depth, the network-tax relations are significant only for subsamples of firms whose executives have a financial or accounting background. We contribute to the literature on tax avoidance by demonstrating how an external social network is another crucial characteristic of executives that influences corporate tax avoidance.

Suggested Citation

  • Chih-Liang Liu & Junmao Chiu, 2024. "External social networks and tax avoidance," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1459-1504, May.
    • Handle: RePEc:kap:rqfnac:v:62:y:2024:i:4:d:10.1007_s11156-024-01242-y
    DOI: 10.1007/s11156-024-01242-y
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    More about this item

    Keywords

    External social network; Corporate tax avoidance; Chief executive officer; Chief financial officer;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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