Abstract
Recent studies on tax avoidance report that having female executives in companies increases accounting transparency and firm value by reducing tax avoidance. These studies explain that the more risk-averse and conservative characteristics of females affect corporate decision making about tax strategies if the company has female executives. In this study, we assume that the higher the proportion of female employees in a company, the more likely the risk-averse and conservative characteristics of females will affect the firm’s decision making, thereby reducing tax avoidance activities and improving corporate sustainability. To verify this hypothesis, we empirically analyze the association between the female employee ratio and tax avoidance. From the empirical results, we find increasing the female employee ratio may reduce the level of tax avoidance. We also find that companies with a high percentage of female employees show less tax avoidance than those with a low percentage of female employees. The findings suggest that by increasing the ratio of female employees, a company can improve its sustainability in terms of tax avoidance by forming a risk-averse and conservative corporate environment.
Highlights
Companies must manage their cash assets efficiently for sustainable business operation
These findings support the arguments that by increasing its ratio of female employees, a company can improve its sustainability in terms of tax avoidance by forming a risk-averse and conservative corporate environment
High female employee ratio (HFER) is a dummy variable based on the median ratio of the female employee ratio (FER)
Summary
Companies must manage their cash assets efficiently for sustainable business operation. The tax strategies of companies to reduce their corporate taxes has been called various terms, such‚ as tax avoidance, tax aggressiveness, tax sheltering, tax evasion, tax noncompliance and others, but the definition of these terms remain somewhat unclear [1,2,3]. This is because the definition of tax avoidance may vary depending on whether the tax strategy is carried out within legal or illegal bounds. On the basis of their study, we define tax avoidance as all corporate actions to reduce explicit tax burdens, regardless of whether or not those actions are illegal
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