Exploring the Link between Corporate Governance Characteristics and Effective Corporate Tax Rate: A Panel Data Approach on U.S. Listed Companies

Radu Alin Păunescu,Ştefan Cristian Gherghina,Georgeta Vintilă

doi:10.5171/2016.857506

Abstract

Exploring the Link between Corporate Governance Characteristics and Effective Corporate Tax Rate: A Panel Data Approach on U.S. Listed Companies

Highlights

A special subject of finance is the corporate finance being comprehensive in terms of information presented, and of interest to a broad range of stakeholders in the financial markets: shareholders, managers, investors
This paper examines the link between corporate governance characteristics and effective corporate tax rate
We extend the empirical research by estimating panel least squares regressions and quantile regressions

Summary

Introduction

A special subject of finance is the corporate finance being comprehensive in terms of information presented, and of interest to a broad range of stakeholders in the financial markets: shareholders, managers, investors. It is interesting to see if and how the management decisions (CEO, Board of Directors) on reducing the effective rate are influenced by rules imposed by corporate governance, and whether they may affect the company as a whole. Armstrong et al (2015) considered that unless paying more attention to agent problems that occur within a company, managers will apply more methods of tax avoidance to reduce the ECTR and to show a positive image to shareholders, but sometimes these methods may have negative effects on company’s performance. Ribeiro et al (2015) analyzed the determinants of effective tax rate and included elements of corporate governance They obtained evidence supporting that insider’s holdings of shares known as ‘insider ownership’, are associated with lower levels of ECTR. Corporate governance characteristics are said to be Granger-caused by ECTR if ECTR helps in the prediction of corporate governance characteristics or if the coefficients on the lagged corporate governance characteristics are statistically significant

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Concluding Remarks