CEO Sports Hobby and Firms' Tax Aggressiveness

• In Event: Tax

Abstract

Recent accounting research suggest that individual executives play a significant role in shaping a firm’s tax planning (e.g., Dyreng, Hanlon, and Maydew 2010). Building on psychology research that finds sports interests reflect individual’s risk taking preferences, we develop a novel measure of CEO risk attitudes based on CEOs’ risky sports hobbies and examine its effect on corporate tax aggressiveness. We find that firms managed by CEOs with riskier sports hobbies are more aggressive in avoiding corporate taxes. This association is more pronounced when CEOs exhibit greater consistency in the riskiness in their range of sports hobbies, and for CEOs engaged in individual sports and outdoor sports. We also find our documented effects are more pronounced for CEOs with greater power. Our results hold after accounting for the endogeneity of CEOs’ risky sports taking decisions.

Authors

• Shuqing Luo, National University of Singapore

• Terry J Shevlin, University of California-Irvine

• Shi Lirong, National University of Singapore

• Aimee Shih, National University of Singapore