Managerial Ability and Tax Avoidance

• In Event: Personal and Corporate Tax Issues

Abstract

This study examines the relation between managerial ability and tax avoidance across the tax avoidance continuum. We find that more-able managers are associated with lower levels of tax aggressiveness. Specifically, more able managers are associated with higher ETRs, which is indicative of less upward manipulation of pretax book income; lower levels of tax aggressive ETRs; lower book-tax differences, permanent book-tax differences, and discretionary book-tax differences (DTAX); higher UTBs, which indicates more willingness to recognize uncertain tax positions on the financial statements; and lower levels of tax sheltering. We conclude that more-able managers do not need to rely on tax aggressiveness to achieve positive financial results. This study contributes to the extant literature by examining managerial ability and the continuum of tax avoidance.

Authors

• Marcus J Burke, University of Scranton

• Megan Burke, Marist College