Taxes and director independence: evidence from board reforms worldwide

Qingyuan Li (), Edward L. Maydew (), Richard H. Willis () and Li Xu ()
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Qingyuan Li: Wuhan University
Edward L. Maydew: University of North Carolina at Chapel Hill
Richard H. Willis: Vanderbilt University
Li Xu: Washington State University

Review of Accounting Studies, 2023, vol. 28, issue 2, No 15, 910-957

Abstract: Abstract We examine whether changes to corporate governance resulting from board reforms affect corporate tax behavior. While the connection between corporate governance and tax behavior has been the subject of intense interest in the literature, a lack of exogenous variation in governance has hampered inferences. Our inquiry exploits a set of major board reforms that capture shocks to board reforms for firms in 31 countries. The results indicate that corporate tax avoidance decreases significantly following major board reforms. We find that the influence of board reforms on corporate tax behavior is stronger in firms with relatively higher agency conflicts and more opaque information environments.

Keywords: Corporate taxation; Board reform; Director independence; Corporate governance (search for similar items in EconPapers)
JEL-codes: H26 K42 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11142-021-09660-2

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