Family ownership and corporate tax aggressiveness: The moderating effect of independent commissioner

Abstract

The family firm literature has found that 73% of empirical studies focus on American and European family firms (De Massis, Sharma, Chua, & Chrisman, 2012). De Massis et al. (2012) propose investigating family firms with contextual nuances of family firms in under-represented areas such as Asia. In addition, study on family firms related to tax aggressiveness activities is limited and the mixed results. Therefore, this study aims to explain the effect of family ownership on corporate tax aggressiveness. This study also investigates whether independent commissioners influence the practice of tax aggressiveness by family firms. The study observed 220 manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2011 to 2015. We found that family ownership has a negative effect on tax aggressiveness. We also found that independent commissioners reinforce the negative influence of family ownership with tax aggressiveness. Our study contributes to the family firm literature in developing countries, particularly in terms of tax aggressiveness. We also provide practical implications for management to consider independent commissioners to provide adequate supervisors and advisors regarding family firm tax strategies.