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Do generalist CEOs engage in more tax avoidance than specialist CEOs?

Do generalist CEOs engage in more tax avoidance than specialist CEOs? Existing research suggests that generalist CEOs, who possess managerial skills that are transferrable across firms and industries, are more able to bear downside risk than specialist CEOs with non-transferrable managerial expertise. In this paper, we examine whether generalist CEOs are better positioned to engage in risky tax avoidance strategies than specialist CEOs. Our empirical results support this prediction and show that firms with generalist CEOs tend to engage in more tax avoidance than those with specialist CEOs. Our identification strategy includes an instrumental variable method and a difference-in-differences test using CEO turnover as a quasi-natural experiment to correct for endogeneities. A battery of robustness checks and cross-sectional tests strengthens our findings. Taken together, our findings imply that general managerial skills of CEOs matter more for tax planning than do specific managerial skills. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting and Business Research Taylor & Francis

Do generalist CEOs engage in more tax avoidance than specialist CEOs?

Kabir, Muhammad; Rashid, Harun
Accounting and Business Research , Volume OnlineFirst: 27 – Apr 25, 2023
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Publisher
Taylor & Francis
Copyright
© 2023 Informa UK Limited, trading as Taylor & Francis Group
ISSN
2159-4260
eISSN
0001-4788
DOI
10.1080/00014788.2023.2183486
Publisher site
See Article on Publisher Site

Abstract

Existing research suggests that generalist CEOs, who possess managerial skills that are transferrable across firms and industries, are more able to bear downside risk than specialist CEOs with non-transferrable managerial expertise. In this paper, we examine whether generalist CEOs are better positioned to engage in risky tax avoidance strategies than specialist CEOs. Our empirical results support this prediction and show that firms with generalist CEOs tend to engage in more tax avoidance than those with specialist CEOs. Our identification strategy includes an instrumental variable method and a difference-in-differences test using CEO turnover as a quasi-natural experiment to correct for endogeneities. A battery of robustness checks and cross-sectional tests strengthens our findings. Taken together, our findings imply that general managerial skills of CEOs matter more for tax planning than do specific managerial skills.

Journal

Accounting and Business Research – Taylor & Francis

Published: Apr 25, 2023

Keywords: Tax avoidance; Tax uncertainty; CEO skills; Agency problem

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