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Banker directors on board and corporate tax avoidance

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  • Song, Qian
  • Ding, Wenjie
  • Hasan, Iftekhar
  • Wang, Qingwei

Abstract

We investigate how shareholder-debtholder conflict of interest affects the corporate tax avoidance using a unique setting of the affiliated and unaffiliated commercial bankers’ board representation. Consistent with the notion that board representation grants lenders’ access to private information that helps monitor and influence firms’ tax practice, we find that appointments of affiliated banker directors significantly reduce firms’ tax avoidance behavior, while appointing unaffiliated banker directors shows no such effect. The impact of affiliated banker directors on alleviating tax avoidance is stronger among firms with severer conflict of interest between shareholders and debtholders, specifically among firms with weaker corporate governance, higher financial leverage and higher CEO stock ownership.

Suggested Citation

  • Song, Qian & Ding, Wenjie & Hasan, Iftekhar & Wang, Qingwei, 2024. "Banker directors on board and corporate tax avoidance," Journal of Empirical Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:empfin:v:79:y:2024:i:c:s0927539824000859
    DOI: 10.1016/j.jempfin.2024.101551
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    More about this item

    Keywords

    Banker directors; Corporate governance; Agency problem; Tax avoidance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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