CEO compensation, CEO attributes and tax aggressiveness: evidence from French firms listed on the CAC 40

Abstract

PurposeThis paper aims to examine the impact of CEO (chief executive officer) compensation and CEO attributes on the level of tax aggressiveness of French companies.Design/methodology/approachThe sample comprises 180 firm-year observations of 40 companies listed on the CAC 40 during the period ranging from 2008 to 2018. For the purpose of overcoming the problems of heteroscedasticity and autocorrelation, the authors apply the generalized least square panel regression.FindingsThis study’s results corroborate the importance of CEO compensation and CEO attributes as determinants of tax aggressiveness. In addition, the authors come up with the fact that CEO compensation has a negative effect on tax aggressiveness, and that older CEOs and CEOs with accounting expertise are negatively linked with tax aggressiveness. The authors also find out that there is a positive relationship between the CEO tenure and tax aggressiveness. Moreover, the authors report that foreign CEOs are more likely to engage in tax aggressiveness practices than local CEOs.Research limitations/implicationsThe unavailability of all annual reports and the use of only one proxy to measure tax aggressiveness present limitations. This study shows significant implications for shareholders, regulators and researchers. As a matter of fact, shareholders will observe the effect of appointing a foreign CEO on the tax aggressiveness level. This study may also provide regulators with new ideas regarding the role of the CEO and its impact on aggressive decision-making. And it brings forth new insight for researchers through adding a foreign CEO as a new determinant of tax aggressiveness.Originality/valueAccording to the authors’ knowledge, this study is the first to provide empirical evidence regarding the effect of both CEO compensation and CEO attributes on tax aggressiveness. It also looks into the impact of a foreign CEO on tax aggressiveness.