Abstract
This paper analyses tax aggressiveness in family firm generations. Moreover, taking into account the heterogeneity in family firms, we check whether the successive generations in control show different tax avoidance behaviour. The empirical evidence, based on the quasi-experiment of the 2012 Spanish thin capitalization rule, reveals that there is a positive relationship between tax aggressiveness and successive generations. Moreover, the founder and second generations follow a similar conservative tax avoidance approach, whereas the third and fourth generations are found to be more tax aggressive.
Highlights
Tax planning is critical for companies and has attracted growing interest from researchers, practitioners and policy-makers (Minnick & Noga, 2010; Shackelford & Shevlin, 2001)
Despite some interesting empirical evidence (Deai & Dharmapala, 2006), the results are contradictory on this issue
Only a limited number of studies have been conducted on small and medium-sized enterprises (SMEs), with very few taking into account the heterogeneity in family firms (Chua et al, 2012)
Summary
Tax planning is critical for companies and has attracted growing interest from researchers, practitioners and policy-makers (Minnick & Noga, 2010; Shackelford & Shevlin, 2001). Taxes represent an important cost for the company since they result in a potential lower cashflow for the shareholders (Chen et al, 2010), and influence company long-term growth and investment (Sánchez et al, 2016). In line with Chen et al (2010), in our study, tax aggressiveness refers to “downgrade management of taxable income through tax planning activities”. We could use the expression tax management. Following the suggestion of several authors to focus on the understudied area of family firm research (Mazzi, 2011; Sánchez et al, 2016; Steijvers & Niskanen, 2014) our interest is in determining whether tax aggressive-
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