Abstract
ABSTRACT Highlighting managerial ability as a moderator of tax adjustment behaviour, this study finds that firms led by more capable managers exhibit slower adjustment speed of tax avoidance towards the optimal level. Furthermore, our findings remain robust after employing the propensity score matching and instrumental variable approaches. Cross-sectional analysis reveals that the negative association between managerial ability and tax avoidance adjustment speed is stronger for firms facing larger transaction costs and more complex operations. This implies that competent managers are more inclined to avoid incurring costs related to unwinding previous tax strategies, even when their firms deviate from the optimal level of tax avoidance.
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Schedule a callMore From: Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad
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