Top Executives’ Early Life Experience and Tax Avoidance

• In Event: 10.01. Human Capital Effects in Audit and Tax

Abstract

This paper investigates the influence of top executives’ early-life famine experience on corporate tax practices in China. We find an overall negative association between board chairs’ famine experience and tax avoidance. Our channel tests confirm that the two perspectives of “risk aversion” and “altruism” explain this negative association. Further, we find that the mitigating effect of the famine experience on tax avoidance is more pronounced in firms whose board chairs had the famine experience in their early childhood or adolescent years, consistent with the psychology literature that experiences in the childhood and adolescent periods have greater ‘imprint’ on human behavior. Our study fills a critical gap in tax research by directly linking top executives’ life experiences to corporate tax practices.

Authors

• Yukun Pan, Southwestern University of Finance and Economics

• Lin Liao, Southwestern University of Finance & Economics

• Troy Yao, Queensland University of Technology

• Joseph Zhang, University of Memphis