Skip to main content
SpringerLink
Log in

The effect of corporate governance mechanisms on tax planning during financial crisis: an empirical study of companies listed on the Athens stock exchange

  • Original Article
  • Published:
International Journal of Disclosure and Governance Aims and scope Submit manuscript

Abstract

While tax burden is always one of the primary concerns for corporate management and finance, it is questionable whether tax has always been among the core factors of corporate governance. This study aims to explore the effect of corporate governance on tax planning during the adverse circumstances created by the economic crisis. The effective tax rates of a sample of 55 non-financial companies listed on the Athens stock exchange (ASE) during the 2011–2015 period were used as a proxy of tax planning and were regressed on corporate governance characteristics, controlling for firm specific attributes. Results showed a significant positive association of board independence with tax planning and a significant negative association with chief executive officer (CEO) duality and firm size. The remaining corporate governance and firm variables which included board size, audit firm size, ownership concentration, leverage and liquidity were not found to exert a significant influence on corporate tax planning of listed companies in Greece. Our results shed light on the relationship of governance with corporate tax planning in periods of financial distress, and may be of particular interest for market participants, investors, tax authorities and policy makers in their efforts to improve the efficiency of the tax system and public revenue.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Allingham, M.G., and A. Sadmo. 1972. Income tax evasion: A theoretical analysis. Journal of Public Economics 1: 323–338.

    Article  Google Scholar 

  • Armstrong, C.S., J.L. Blouin, A.D. Jagolinzer, and D.F. Larker. 2015. Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics 60: 1–17.

    Article  Google Scholar 

  • Badertscher, B.A., P.S. Katz, and S.O. Rego. 2013. The separation of ownership and control and corporate tax avoidance. Journal of Accounting and Economics 56: 228–250.

    Article  Google Scholar 

  • Baltagi, B.H. 2005. Econometric analysis of panel data, 3rd ed. New York: Willey.

    Google Scholar 

  • Bravo, F. 2018. Does board diversity matter in the disclosure process? An analysis of the association between diversity and disclosure of information on risks. International Journal of Disclosure and Governance 15(2): 104–114.

    Article  Google Scholar 

  • Chen, K.-P., and C.Y.C. Chu. 2005. Internal control versus external manipulation: A model of income tax evasion. RAND Journal of Economics 36(1): 151–164.

    Google Scholar 

  • Chytis, E., S. Tasios, and N. Gerantonis. 2018. Tax avoidance and corporate governance attributes: Evidence from listed companies in Greece. In 15th International conference on enterprise, systems, accounting, logistics and management, Kefalonia 24–26 June.

  • Crabbe, K. 2010. The impact of the auditor and tax advice on the effective tax rate, http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.846.7797&rep=rep1&type=pdf. Accessed 14/06/2019.

  • Crocker, K.J., and J. Slemrod. 2005. Corporate tax evasion with agency costs. Journal of Public Economics 89: 1593–1610.

    Article  Google Scholar 

  • Desai, M.A., and D. Dharmapala. 2006. Corporate tax avoidance and high-powered incentives. Journal of Financial Economics 79(1): 145–179.

    Article  Google Scholar 

  • Dyreng, S.D., M. Hanlon, and E.L. Maydew. 2010. The effects of executives on corporate tax avoidance. The Accounting Review 25(4): 1163–1189.

    Article  Google Scholar 

  • Erle, B. 2008. Tax risk management and board responsibility. In Tax and corporate governance. MPI studies on intellectual property, competition and tax law, vol. 3, ed. W. Schön. Berlin, Heidelberg: Springer.

    Google Scholar 

  • Edwards, A., C. Schab, and T. Shevlin. 2016. Financial constraints and cash tax savings. The Accounting Review 91(3): 859–881.

    Article  Google Scholar 

  • European Commission. 2017. Aggressive tax planning indicators, Final report, https://ec.europa.eu/taxation_customs/sites/taxation/files/taxation_papers_71_atp_.pdf. Accessed 10 January 2019.

  • Fisher, J. 2014. Fairer shores: Tax heavens, tax avoidance and corporate social responsibility. Boston University Law Review 94(1): 337–365.

    Google Scholar 

  • Graham, J.R., M. Hanlon, T. Shevlin, and N. Shroff. 2014. Incentives for tax planning and avoidance: Evidence from the field. The Accounting Review 89(3): 991–1023.

    Article  Google Scholar 

  • Gupta, S., and K. Newberry. 1997. Determinants of the variability in corporate effective tax rates: Evidence from longitudinal data. Journal of Accounting and Public Policy 16(1): 1–34.

    Article  Google Scholar 

  • Halioui, K., S. Neifar, and F.B. Abdelaziz. 2016. Corporate governance, CEO compensation and tax aggressiveness: Evidence from American firms listed on NASDAQ 100. Review of Accounting and Finance 15(4): 445–462.

    Article  Google Scholar 

  • Huang, D.-F., N.-Y. Chen, and K.-W. Gao. 2013. The tax burden of listed companies in China. Applied Financial Economics 23(14): 1169–1183.

    Article  Google Scholar 

  • Jensen, C.M., and W.H. Meckling. 1976. Theory of the firm: Managerial behavior, Agency cost and ownership structure. Journal of Financial Economics 3(4): 305–360.

    Article  Google Scholar 

  • Jensen, C.M. 1993. The modern industrial revolution, exit and failure of internal control systems. Journal of Finance 48(3): 831–880.

    Article  Google Scholar 

  • Kourdoumpalou, S. 2016. Do corporate governance best practices restrain tax evasion? Evidence from Greece. Journal of Accounting and Taxation 8(1): 1–10.

    Article  Google Scholar 

  • Khan, M., S. Srinivasan, and T. Liang. 2017. Institutional ownership and corporate tax avoidance: New evidence. The Accounting Review 92(2): 101–122.

    Article  Google Scholar 

  • Lanis, R., and G. Richardson. 2011. The effect of director composition on corporate tax aggressiveness. Journal of Accounting and Public Policy 30: 50–70.

    Article  Google Scholar 

  • Lee, B.B., A. Dobiyanski, and S. Minton. 2015. Theories and empirical proxies for corporate tax avoidance. Journal of Applied Business and Economics 17(3): 21–34.

    Google Scholar 

  • McGuire, S.T., C.O. Thomas, and D. Wang. 2012. Tax avoidance: Does tax-specific industry expertise make a difference? The Accounting Review 87(3): 975–1003.

    Article  Google Scholar 

  • Minnick, K., and T. Noga. 2010. Do corporate governance characteristics influence tax management? Journal of Corporate Finance 16: 703–718.

    Article  Google Scholar 

  • Mulyadi, M.S., and Y. Anwar. 2015. Corporate governance earnings management and tax management. Procedia Social and Behavioral Sciences 177: 363–366.

    Article  Google Scholar 

  • Nomura, H. 2017. What determines Japanese effective tax rates? Evidence from firms listed on the Tokyo Stock Exchange. KEA-APEA 2017 conference, Seoul, pp. 1–18.

  • Oats, L., and P. Tuck. 2019. Corporate tax avoidance: Is tax transparency the solution? Accounting and Business Research 49(5): 565–583.

    Article  Google Scholar 

  • Torres-Reyna, Oscar. 2007. Panel data analysis fixed and random effects. Princeton: Princeton University.

    Google Scholar 

  • Pratama, A. 2017. Company characteristics, corporate governance and aggressive tax avoidance practice: A study of indonesian companies. Review of Integrative Business and Economics Research 6(4): 70–81.

    Google Scholar 

  • Rego, S.O., and R. Wilson. 2012. Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research 50(3): 775–810.

    Article  Google Scholar 

  • Ribeiro, A., A. Cerqueira, and E. Brandao. 2015. The determinants of effective tax rates: Firms’ characteristics and corporate governance. FEP working papers, University of Porto.

  • Richardson, G., G. Taylor, and R. Lanis. 2013. The impact of board of director oversight characteristics on corporate tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy 32: 68–88.

    Article  Google Scholar 

  • Richardson, G., B. Wang, and X. Zhang. 2016. Ownership structure and corporate tax avoidance: Evidence from publicly listed private firms in China. Journal of Contemporary Accounting and Economics 12(2): 141–158.

    Article  Google Scholar 

  • Robinson, J. R., Y. Xue, and M. H. Zhang. 2012. Tax planning and financial expertise in the audit committee. SSRN: https://ssrn.com/abstract=2146003 or http://dx.doi.org/10.2139/ssrn.2146003.

  • Saaverda, D. 2013. Analysis of unsuccessful tax avoiders, https://ssrn.com/abstract=2486917. Accessed 14/06/2019.

  • Stanfield, J. W. 2011. Cash liquidity, holdings, and performance as determinants of corporate tax avoidance, Unpublished thesis, Purdue University.

  • Vafeas, N. 2000. Board structure and the informativeness of earnings. Journal of Accounting and Public Policy 19: 139–160.

    Article  Google Scholar 

  • Watts, R.L., and J.L. Zimmerman. 1986. Positive accounting theory. Englewood Cliffs: Prentice Hall.

    Google Scholar 

Download references

Acknowledgements

We are grateful to Professor Constantinos Stefanou for insightful comments and suggestions that have greatly improved the paper. The paper has benefited from comments and suggestions by participants of 16th ICESALM 2019.

Author information

Authors and Affiliations

  1. Department of Accounting and Finance, School of Economics and Administrative Sciences, University of Ioannina, Preveza Campus, Preveza, 48 100, Greece

    Evangelos Chytis & Stergios Tasios

  2. Department of Public Administration, School of Economics and Public Administration, Panteion University of Social and Political Sciences, Athens, Greece

    Ioannis Filos

Authors
  1. Evangelos Chytis
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Stergios Tasios
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ioannis Filos
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Evangelos Chytis.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Chytis, E., Tasios, S. & Filos, I. The effect of corporate governance mechanisms on tax planning during financial crisis: an empirical study of companies listed on the Athens stock exchange. Int J Discl Gov 17, 30–38 (2020). https://doi.org/10.1057/s41310-020-00072-3

Download citation

  • Received:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41310-020-00072-3

Keywords

JEL Classification

Search

Navigation