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How does governance affect tax avoidance? Evidence from shareholder proposals

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  • Alex Young

Abstract

I examine the effect of corporate governance on tax avoidance. Specifically, I use a regression discontinuity design to analyse the effect of governance-related shareholder proposals that pass or fail by a small percentage of votes. The passage of such proposals around the 50% threshold can be viewed as random assignment of improved governance and thus cleanly identifies a causal estimate. I find that the adoption of governance proposals decreases cash effective tax rates (ETR), which suggests that improved governance increases tax avoidance. The result contributes to our understanding of the determinants of firms’ ETR.

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  • Alex Young, 2017. "How does governance affect tax avoidance? Evidence from shareholder proposals," Applied Economics Letters, Taylor & Francis Journals, vol. 24(17), pages 1208-1213, October.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:17:p:1208-1213
    DOI: 10.1080/13504851.2016.1267837
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    References listed on IDEAS

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