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Taxes and director independence: evidence from board reforms worldwide

Author

Listed:
  • Qingyuan Li

    (Wuhan University)

  • Edward L. Maydew

    (University of North Carolina at Chapel Hill)

  • Richard H. Willis

    (Vanderbilt University)

  • Li Xu

    (Washington State University)

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.

Suggested Citation

  • Qingyuan Li & Edward L. Maydew & Richard H. Willis & Li Xu, 2023. "Taxes and director independence: evidence from board reforms worldwide," Review of Accounting Studies, Springer, vol. 28(2), pages 910-957, June.
    • Handle: RePEc:spr:reaccs:v:28:y:2023:i:2:d:10.1007_s11142-021-09660-2
    DOI: 10.1007/s11142-021-09660-2
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    More about this item

    Keywords

    Corporate taxation; Board reform; Director independence; Corporate governance;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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