Journal of Tax Reform
CEO characteristics and Tax Aggressiveness in Indonesian Family Firms: The Upper Echelons Theory Perspective
Rachmawati Meita Oktaviani 1, Abdul Rohman 2, Zulaikha Zulaikha 2
1 Universitas Stikubank, Semarang, Indonesia
2 Universitas Diponegoro, Semarang, Indonesia
Abstract
Tax aggressiveness is an effort that companies can undertake to save on tax payments. One of the factors driving why tax aggressiveness is pursued is the presence of CEO. This study emphasizes the characteristics of CEO. Therefore, this study aims to analyze the effect of CEO characteristics on tax aggressiveness based on the upper echelon’s theory perspective. CEO characteristics are divided into CEO tenure, educational background, and gender. CEO tenure in this study is proxied by how long someone has held the position of CEO, while educational background and gender are proxied using dummy variables. The choice of profitability is because profit is used as the main basis in tax calculation. The sampling technique used was purposive sampling, with an observation period of 2019–2022 in the seventy family firms listed on the Indonesia Stock Exchange (IDX). The data used is panel data and analyzed employing the EViews program. The model estimation tests feasible to use was the fixed effect model (FEM). The regression results show that CEO tenure, educational background, and gender partially and simultaneously affected tax aggressiveness. The study results generally indicate that family-owned companies tend to utilize more tax aggressiveness. At the same time, the level of education of the general director has a negative effect on tax aggressiveness, i.e. the higher the level of education, the less tax aggressiveness. The gender asymmetry is that women as family business leaders demonstrate greater tax aggressiveness than male leaders. Therefore, the benefit of this research from the government’s perspective is to formulate policies to reduce efforts of tax aggressiveness, especially for companies predominantly owned by families.
Keywords
CEO tenure, CEO educational background, CEO gender, tax aggressiveness, family firms
JEL classification
E21, H26, H71References
1. Frank M., Lynch L., Rego S. Tax Reporting Aggressiveness and its Relation Aggressive Financial Reporting. Accounting Review. 2009;84(2):1–47. https://doi.org/10.2139/ssrn.647604
2. Richardson R., Lanis R. Determinants of the variability in corporate effective tax rates and tax reform: Evidence from Australia. Journal of Accounting and Public Policy. 2007;26(6):689–704. https://doi.org/10.1016/j.jaccpubpol.2007.10.003
3. Martinez A., Ramalho G. Family Firms and Tax Aggressiveness in Brazil. International Business Research. 2014;7(3):129–136. https://doi.org/10.5539/ibr.v7n3p129
4. Steijvers T., Niskanen M. Tax aggressiveness in private family firms: An agency perspective. Journal of Family Business Strategy. 2014;5(4):347–357. https://doi.org/10.1016/j.jfbs.2014.06.001
5. Chen S., Chen X., Chneg Q., Shevlin T. Are family firms more tax aggressive than non-family firms? Journal of Financial Economics. 2010;95(1):41–61. https://doi.org/10.1016/j.jfineco.2009.02.003
6. Sánchez-Marín G., Navarro M.J., Clavel J. The influence of family involvement on tax aggressiveness of family firms. Journal of Family Business Management. 2016;6(2):143–168. https://doi.org/10.1108/JFBM-03-2015-0017
7. Flamini G., Vola P., Songini L., Gnan L. The Determinants of Tax Aggressiveness in Family Firms: An Investigation of Italian Private Family Firms. Sustainability. 2021;13(14):7654. https://doi.org/10.3390/su13147654
8. Dyreng S. D., Ha M., Maydew E.L. The Effects of Executives on Corporate Tax Avoidance. Accounting Review. 2010;85(4);1163–1189. https://doi.org/10.2308/accr.2010.85.4.1163
9. Lanis R., Richardson G. The effect of board of director composition on corporate tax aggressiveness. Journal of Accounting and Public Policy. 2011;30(1):50–70. https://doi.org/10.1016/j.jaccpubpol.2010.09.003
10. Hambrick D.C., Mason P.A. Upper Echelons: The Organization as a Reflection of Its Top Managers. Academy of Management Review. 1984;9(2):193–206. https://doi.org/10.2307/258434
11. Chen D., Zheng Y. CEO Tenure and Risk-Taking. Global Business and Finance Review. 2014;19(1):1–27. https://doi.org/10.2139/ssrn.2038064
12. Goldman N.C., Power K., Wiliiam B.M. How Does CEO Tenure Affect Corporate Income Tax Planning and Financial Reporting Decision? 2017. 41 p. https://doi.org/10.2139/ssrn.2969662
13. Aliani K. CEO characteristics and corporate tax planning evidence from US companies. International Journal of Managerial and Financial Accounting. 2014;6(1):49–59. https://doi.org/10.1504/IJMFA.2014.060508
14. Bhagat S., Bolton B., Subramanian A. CEO Education, CEO Turnover, and Firm Performance. 2010. 46 p. https://doi.org/10.2139/ssrn.1670219
15. Farag H., Mallin C. The influence of CEO demographic characteristics on corporate risk-taking: evidence from Chinese IPOs. European Journal of Finance. 2016;24(16):1528–1551. https://doi.org/10.1080/1351847X.2016.1151454
16. Khaoula A., Zarai M.A. Demographic Diversity in the Board and Corporate Tax Planning in American Firms. Business Management and Strategy. 2012;3(1):72–86. https://doi.org/10.5296/bms.v3i1.1851
17. Charness G., Gneezy U. Strong Evidence for Gender Differences in Risk Taking. Journal of Economic Behavior and Organization. 2012;83(1):50–58. https://doi.org/10.1016/j.jebo.2011.06.007
18. Ho S.S.M., Li A.Y., Tam K., Zhang F. CEO Gender, Ethical Leadership, and Accounting Conservatism. Journal of Business Ethics. 2015;127(2):351–370. https://doi.org/10.1007/s10551-013-2044-0
19. Oktaviani R.M., Wulandari S., Sunarto S. Multinational Corporate Tax Avoidance in Indonesia. International Journal of Professional Business Review. 2023;8(2):e01549. https://doi.org/10.26668/businessreview/2023.v8i2.1549
20. Wicaksono K., Oktaviani R.M. Effect of CEO Characteristics Toward Tax Aggressiveness: Overview of Indonesia Family Firms. Jurnal Ekonomi. 2021;26(2):189–205. https://doi.org/10.24912/je.v26i2.745
21. Faccio M., Marchica M.-T., Mura R. CEO gender, corporate risk-taking, and the efficiency of capital allocation. Journal of Corporate Finance. 2016;39:193–209. https://doi.org/10.1016/j.jcorpfin.2016.02.008
22. Abele A., Wojciszke B. Communal and Agentic Content in Social Cognition. A Dual Perspective Model. Advances in Experimental Social Psychology. 2014;50:195–255. https://doi.org/10.1016/B978-0-12-800284-1.00004-7
23. Duan T., Ding R., Hou W., Zhang J.Z. The burden of attention: CEO publicity and tax avoidance. Journal of Business Research. 2018;87:90–101. https://doi.org/10.1016/j.jbusres.2018.02.010
24. Astutik D., Venusita L. The Influence of CEO’s Demographic Characteristics on Tax Aggressiveness in Family Firm. Jurnal Akuntansi Dan Keuangan. 2020;22(1):1–9. https://doi.org/10.9744/jak.22.1.1-9
25. Winedar M., Harymawan I. CEO Skills in Preventing Tax Avoidance Activities and Reducing the Risk of Stock Price Crashes in Indonesia. Journal of Tax Reform. 2023;9(3):451–470. https://doi.org/10.15826/jtr.2023.9.3.152
26. Nguyen P., Rahman N., Zhao R. CEO characteristics and firm valuation: a quantile regression analysis. Journal of Management & Governance. 2018;22(1):133–151. https://doi.org/10.1007/s10997-017-9383-7
27. Finkelstein S., Hambrick D.C. Top-Management-Team Tenure and Organizational Outcomes: The Moderating Role of Managerial Discretion. Administrative Science Quarterly. 1990;35(3):484–503. https://doi.org/10.2307/2393314
28. Nguyen H.L., Fan P. CEO Education and Firm Performance: Evidence from Corporate Universities. Administrative Sciences. 2022;12(4):145. https://doi.org/10.3390/admsci12040145
29. Saidu S. CEO characteristics and firm performance: focus on origin, education and ownership. Journal of Global Entrepreneurship Research. 2019;9(1):29. https://doi.org/10.1186/s40497-019-0153-7
30. Eagly A.H., Johannesen-Schmidt M.C. The leadership styles of women and men. Journal of Social Issues. 2001;57(4):781–797. https://doi.org/10.1111/0022-4537.00241
31. Jbir S., Neifar S., Makni Fourati Y. CEO compensation, CEO attributes and tax aggressiveness: evidence from French firms listed on the CAC 40. Journal of Financial Crime. 2021;28(4):1141–1160. https://doi.org/10.1108/JFC-10-2020-0202
32. Zirgulis A., Huettinger M., Misiunas D. No woman, no aggressive tax planning? A study on CEO gender and effective tax rates in the Lithuanian retail sector. Review of Behavioral Finance. 2022;14(3):394–409. https://doi.org/10.1108/RBF-09-2020-0232
33. Hoseini M., Safari Gerayli M., Valiyan H. Demographic characteristics of the board of directors’ structure and tax avoidance: Evidence from Tehran Stock Exchange. International Journal of Social Economics. 2018;46(2):199–212. https://doi.org/10.1108/IJSE-11-2017-0507
34. Lanis R., Richardson G., Taylor G. Board of Director Gender and Corporate Tax Aggressiveness: An Empirical Analysis. Journal of Business Ethics. 2017;144(3):577–596. https://doi.org/10.1007/s10551-015-2815-x
35. Carmen Díaz-Fernández M., Rosario González-Rodríguez M., Pawlak M. Top management demographic characteristics and company performance. Industrial Management & Data Systems. 2014;114(3):365–386. https://doi.org/10.1108/IMDS-04-2013-0210
About Authors
Rachmawati Meita Oktaviani – SE, M.Si, Ak, Lecture, Faculty of Economic and Business, Universitas Stikubank (Jalan Kendeng V Bendan Ngisor, Semarang 50233, Jawa Tengah, Indonesia); ORCID: https://orcid.org/0000-0002-6770-1464; e-mail: meitarachma@edu.unisbank.ac.id
Abdul Rohman – Professor Dr, SE, M.Si, Ak, Lecture, Faculty of Economic and Business, Universitas Diponegoro (Jalan Erlangga Tengah 17, Semarang, 50241, Jawa Tengah, Indonesia); ORCID: https://orcid.org/0000-0002-3941-3780; e-mail: abdulrohman@lecturer.undip.ac.id
Zulaikha Zulaikha – Dr, SE, M.Si, Ak, Lecture, Faculty of Economic and Business, Universitas Diponegoro (Jalan Erlangga Tengah 17, Semarang, 50241, Jawa Tengah, Indonesia); ORCID: https://orcid.org/0000-0001-5947-5893; e-mail: zulaikha2505@gmail.com
For citation
Oktaviani R.M., Rohman A., Zulaikha Z. CEO characteristics and Tax Aggressiveness in Indonesian Family Firms: The Upper Echelons Theory Perspective. Journal of Tax Reform. 2024;10(1):149–161. doi.org/10.15826/jtr.2024.10.1.162
Article info
Received December 28, 2023; Revised January 28, 2024; Accepted February 4, 2024
DOI: https://doi.org/10.15826/jtr.2024.10.1.162
Download full text article:
~443 KB, *.pdf
(Uploaded
16.04.2024)
Created / Updated: 31 August 2015 / 3 July 2017
© Federal State Autonomous Educational Institution of Higher Education «Ural Federal University named after the first President of Russia B.N.Yeltsin»
Remarks?
select the text and press:
Ctrl + Enter
Portal design: Artsofte
ISSN 2414-9497 (online)