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How do powerful CEOs manage corporate tax aggressiveness?

Author

Listed:
  • Issam Laguir

    (Groupe Sup de Co Montpellier Business School, Montpellier Research in Management (MRM))

  • Raffaele Staglianò

    (Groupe Sup de Co Montpellier Business School, Montpellier Research in Management (MRM))

Abstract

We explore how powerful CEOs manage the tax aggressiveness (TAG) of their firms. The agency view suggests that CEOs invest in TAG to enhance their own private benefits. On the contrary, the stream of corporate social responsibility theories argues that CEOs avoid investment in TAG as, although a corporation exists primarily to increase shareholder value, it must also satisfy the needs of its other stakeholders. Using a panel of hand-collected data from listed Italian firms, we show that the association between CEO power and TAG is non-monotonic. When the CEO is relatively less powerful, an increase in CEO power leads to less TAG engagement. However, as the CEO becomes substantially more powerful, he is more entrenched and invests more in TAG. In fact, when CEO power goes beyond a certain threshold, more powerful CEOs significantly increase TAG.

Suggested Citation

  • Issam Laguir & Raffaele Staglianò, 2014. "How do powerful CEOs manage corporate tax aggressiveness?," Economics Bulletin, AccessEcon, vol. 34(3), pages 1361-1368.
    • Handle: RePEc:ebl:ecbull:eb-14-00582
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    References listed on IDEAS

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    Cited by:

    1. Ming-Hua Liu & Shaohua Tian & Yang Zhang, 2023. "CEO marital status and corporate tax planning behavior," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1207-1242, November.

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    More about this item

    Keywords

    Agency theory; corporate social responsibility; tax aggressiveness; CEO power;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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