Abstract
This article investigates whether family firms are more aggressive in terms of tax planning than non-family firmsin Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, &Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planningactivities. Of the sample of companies, 23% are considered to be family firms. We found a significantrelationship between classification as a family firm and tax aggressiveness, based on two metrics. The first,effective tax rate (ETR), captures the actual taxes paid in relation to pre-tax earnings, while the second, book-taxdifferences (BTD), reflects the differences between accounting income and taxable income. The family firms inthe sample were more tax aggressive than the non-family firms. For the variable BTD, family firms presented apositive sign, indicating a tendency for higher BTD. In turn, ETR had a negative sign, identifying a tendency forfamily firms to pay lower taxes.
Highlights
This article investigates whether family firms are more aggressive in terms of tax planning than non-family firms in Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, & Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planning activities
We employ a sample of firms listed on the BM&FBovespa and apply linear regression to panel data, with tax aggressiveness measured by the effective tax rate (ETR) (Note 1) and the book-tax difference (BTD), for triangulation with the main control variables
Firms pay a lower effective tax rate (ETR) than non-family firms, while for the variable book-tax differences (BTD) the correlation is positive, indicating that family firms tend to have a greater gap between book income and taxable income
Summary
This article investigates whether family firms are more aggressive in terms of tax planning than non-family firms in Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, & Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planning activities. Chen et al (2010) studied the implications of tax aggressiveness and the specific agency conflict that exists in family firms, defined as those in which members of the founding family continue to hold senior management positions, seats on the board of directors or relevant stakes in the controlling block In these companies, there should be a greater agency conflict between majority and minority shareholders and a lesser one between owners and managers in comparison with non-family firms. They tend to reap greater economic benefits from lowering the firm’s tax liability than is the case of managers of non-family firms This situation results in the need for empirical investigation of the relative propensity of family firms to engage in aggressive tax planning
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