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Are CEO Overconfidence and Audit Firm Size Related To Tax Avoidance?

Author

Listed:
  • Paulina Sutrisno

    (Accounting Department, Trisakti School of Management, Indonesia Author-2-Name: Kashan Pirzada Author-2-Workplace-Name: Asian Research Institute for Corporate Governance (ARICG) and Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective - This study aims to examine whether audit firm size mitigates the relationship between CEO overconfidence and tax avoidance. CEO overconfidence has the characteristics of a very high level of self-confidence which influences the pattern of thought and the way they make strategic decisions. CEO overconfidence has a tendency to avoid taxes. It aims to show competence in tax management and raise funds for investment. External party oversight, such as by audit firms, will mitigate the relationship between CEO overconfidence and tax avoidance through an attitude of independence, as well as competence and function as examiners of the company's financial reporting. Methodology/Technique - This study uses a sample of Indonesian non-financial companies in the period 2013-2017. This study analyses the data with statistical methods using linear multiple regression. Finding - The results of this study indicate that CEO overconfidence is positively related to tax avoidance, while audit firm size is negatively related to tax avoidance. However, this study has not been able to prove the influence of audit firm size on the relationship between CEO overconfidence and tax avoidance.

Suggested Citation

  • Paulina Sutrisno, 2020. "Are CEO Overconfidence and Audit Firm Size Related To Tax Avoidance?," GATR Journals afr188, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:afr188
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    References listed on IDEAS

    as
    1. J B Heaton, 2002. "Managerial Optimism and Corporate Finance," Financial Management, Financial Management Association, vol. 31(2), Summer.
    2. Schrand, Catherine M. & Zechman, Sarah L.C., 2012. "Executive overconfidence and the slippery slope to financial misreporting," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 311-329.
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    4. Hanlon, Michelle & Slemrod, Joel, 2009. "What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 126-141, February.
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    More about this item

    Keywords

    CEO overconfidence; Tax Avoidance; Audit Firm Size; Big 4; Book Tax Difference.;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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