Abstract
This article aimed to investigate whether corporate governance uses tax management to increase companies' performance. The objective was checking whether corporate governance characteristics, such as remuneration paid to the executive board, segregation between Chairman and CEO, and the independence and composition of the Board of Directors, influence tax management in Brazilian companies. At the same time, it aimed to identify whether the preceding tax management is reflected on the subsequent tax management. To do this, a sample of 355 Brazilian companies listed on the BM&FBOVESPA between 2008 and 2014 was used, in order to find out whether their corporate governance characteristics influenced tax management, something identified by calculating ETR, CashETR, and BTD. As a result, it was found (i) that the remuneration paid to executives may be regarded as a characteristic influencing tax management in Brazilian firms, and (ii) that the preceding tax management influences the future tax management. In addition, it was found that Brazilian companies do not rule out tax management benefits, since the average effective rate in the sample under analysis was 25%, and it is statistically lower than the nominal rate of taxes on earnings in Brazil, which is 34%.
Highlights
As noticed by Desai and Dharmapala (2007), concerning the study by Adolphe Berle and Gardiner Means on the agency problem (The Modern Corporation and Private Property, 1932), the latter arises when shareholders name managers who can pursue interests of their own at the expense of shareholders’ interests
The research hypotheses tested were: (H1) The companies listed at the various corporate governance levels on the BM&FBOVESPA (Level 1, Level 2, and New Market) are those having better fiscal management, as a consequence, they are those having lower Effective Tax Rate (ETR) and Cash Effective Tax Rate (CashETR) indexes, as well as positive Book-Tax Differences (BTD) figures
(H7) Tax management in the preceding period is reflected on tax management within the subsequent period, so the dependent variables to identify tax management ETR, CashETR, and BTD lagged one year have a significant relationship with the proxies to identify tax management
Summary
As noticed by Desai and Dharmapala (2007), concerning the study by Adolphe Berle and Gardiner Means on the agency problem (The Modern Corporation and Private Property, 1932), the latter arises when shareholders name managers who can pursue interests of their own at the expense of shareholders’ interests. According to Fama and Jensen (1983), the decision-making process of senior management involves four stages, two of which should be the sole responsibility of the Board: ratification of relevant decisions and monitoring of senior management In this way, according to the manuals on corporate governance by the CVM (2002) and the IBGC (2011), the Board of Directors should be independent and there must be segregation between the president of the Board of Directors (Chairman) and the chief executive officer (CEO), in order to enable the Board to play its role of effectively monitoring the executive board, contributing to maximize companies’ performance. This research problem has been prepared: Corporate governance characteristics, such as executive board remuneration, segregation between Chairman and CEO, the independence and composition of the Board of Directors, as well as tax management in preceding years, influence tax management in Brazilian companies?
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