CEO compensation, CEO attributes and tax aggressiveness: evidence from French firms listed on the CAC 40

Sawssan Jbir · Souhir Neifar · Yosra Makni Fourati

36 citations0/0 files storedJournal of Financial Crime

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Corporate Taxation and Avoidance Corporate Finance and Governance Taxation and Legal Issues

Abstract

Purpose This paper aims to examine the impact of CEO (chief executive officer) compensation and CEO attributes on the level of tax aggressiveness of French companies. Design/methodology/approach The sample comprises 180 firm-year observations of 40 companies listed on the CAC 40 during the period ranging from 2008 to 2018. For the purpose of overcoming the problems of heteroscedasticity and autocorrelation, the authors apply the generalized least square panel regression. Findings This study’s results corroborate the importance of CEO compensation and CEO attributes as determinants of tax aggressiveness. In addition, the authors come up with the fact that CEO compensation has a negative effect on tax aggressiveness, and that older CEOs and CEOs with accounting expertise are negatively linked with tax aggressiveness. The authors also find out that there is a positive relationship between the CEO tenure and tax aggressiveness. Moreover, the authors report that foreign CEOs are more likely to engage in tax aggressiveness practices than local CEOs. Research limitations/implications The unavailability of all annual reports and the use of only one proxy to measure tax aggressiveness present limitations. This study shows significant implications for shareholders, regulators and researchers. As a matter of fact, shareholders will observe the effect of appointing a foreign CEO on the tax aggressiveness level. This study may also provide regulators with new ideas regarding the role of the CEO and its impact on aggressive decision-making. And it brings forth new insight for researchers through adding a foreign CEO as a new determinant of tax aggressiveness. Originality/value According to the authors’ knowledge, this study is the first to provide empirical evidence regarding the effect of both CEO compensation and CEO attributes on tax aggressiveness. It also looks into the impact of a foreign CEO on tax aggressiveness.

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References

1999Corporate Ownership Around the World 1984Upper Echelons: The Organization as a Reflection of Its Top Managers 1978Patterns in Strategy Formation 2010A review of tax research 1989Top management and innovations in banking: Does the composition of the top team make a difference?2005Corporate tax avoidance and high-powered incentives 2008Long-Run Corporate Tax Avoidance 2007Are Family Firms More Tax Aggressive Than Non-Family Firms?

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