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Tax Professionals and Antecedents to Aggressive Decision Making: An Examination of Client Identification and Economic Importance

Fri, October 24, 3:45 to 5:15pm, TBA

Abstract

Prior research finds that tax professionals make aggressive recommendations for their clients, even under the threat of increased penalties and other costs. Thus, it is important to further understand why tax professionals may be willing to risk exposure to the increased costs of making aggressive recommendations. This paper examines the impact of two antecedents to aggressive decision-making, namely the role of the interpersonal relationship with the client (client identification) and the economic importance of the client, on the recommendations of tax professionals. Using an experiment with tax professionals, we introduce the construct of client identification in the tax environment and find that, at low to moderate levels of economic importance, stronger client identification leads to more aggressive recommendations. Conversely, at high levels of economic importance, the effects of both high client identification and economic importance appear to be mitigated by more salient countervailing incentives, suggesting a nonlinear relationship between these indicators of client importance and aggressive recommendations.

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