Impact of executive compensation on corporate tax aggressiveness: evidence from India

Gill, Suveera; Arora, Taruntej Singh

doi:10.1108/mf-07-2021-0306

Cited by 4 publications

(4 citation statements)

References 66 publications

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“…Moreover, more than 5,000 companies are listed on BSE (BSE, 2022) in comparison to other Indian stock exchanges, such as National Stock Exchange, where approximately 1,900 companies are listed (NSE, 2022). Furthermore, a number of CG studies from India have also chosen this Index for deciding the final sample of the study (Kohli, 2016; Jaiswall and Bhattacharyya, 2016; Bhatia and Srivastava, 2017; Arora and Bodhanwala, 2018; Kohli, 2018; Arora and Gill, 2022a; Arora and Gill, 2022b).…”

Section: Methodsmentioning

confidence: 99%

“…The study follows sample selection criteria for drawing the final sample, as summarized in Table 1. First, all the companies belonging to the public sector were deleted as their policies are largely influenced by social obligations and are government-regulated (Arora and Gill, 2022b). Second, banking and other financial corporations were excluded as these are governed by regulations other than the Companies Act 2013, such as the Banking Regulation Act 1949 and the Reserve Bank of India Act 1934 (Saha and Kabra, 2019).…”

Section: Methodsmentioning

confidence: 99%

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Board characteristics and CEO turnover–performance relationship: evidence from India

Jatana

2022

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Purpose This paper aims to investigate the impact of board characteristics on CEO turnover performance relationship (TPR) in Indian listed firms. Design/methodology/approach A subset of the Standard and Poor’s Bombay Stock Exchange 500 (S&P BSE 500) Index companies was analyzed over the period 2015–2019 using the logistic (fixed-effects) regression model. Findings It was found that a weak relationship exists between CEO turnover and firm performance. With respect to board characteristics, board size was found to have a significant role in strengthening the TPR. However, other characteristics, such as board independence, multiple directors, board meetings and board gender diversity, played no role in influencing the TPR. Research limitations/implications First, the study period is limited to five years, during which several sample firms did not face any CEO turnover event leading to small sample size. Second, this study considers only the board’s gender diversity, whereas other types of diversity are omitted. Third, this study does not differentiate between insider and professional CEOs. Practical implications The findings suggest that regulators should focus on the effective enforcement of laws to strengthen the TPR and improve the monitoring role of boards, particularly in emerging economies like India, which face type II agency problems in addition to traditional principal–agent conflict. The results also offer implications for corporations, investors and academic researchers, highlighting areas that need considerable attention pertaining to corporate governance. Originality/value This study discerns the impact of several board-related characteristics on the TPR, particularly after the introduction of the new Companies Act 2013 in the emerging economy of India, where it has not been explored extensively.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Board characteristics and CEO turnover–performance relationship: evidence from India

Jatana

2022

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“…The inclination to willfully unveil carbon data and the quality is excellent when executives' compensation contracts align with stakeholder interests. Moreover, Arora and Gill (2022) established the association between executive compensation and corporate tax aggressiveness. However, the findings showed a negative impact of fixed executive payment on tax aggressiveness and no significant linkage between compensation and tax aggressiveness.…”

Section: Theoretical Background and Literature Reviewmentioning

confidence: 99%

The impact of executives' compensation and corporate governance attributes on voluntary disclosures: Does audit quality matter?

Kumar

2023

JAAR

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PurposeThis article investigated whether the executives' compensation and corporate governance attributes are aligned with stakeholders' demands for higher corporate voluntary disclosures. Moreover, the study also examined the moderating role of the auditor's reputation in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.Design/methodology/approachThe study used a sample of S&P BSE index constituents' 90 Indian firms for 2017–2019. The voluntary disclosure scores were fetched from the India Disclosure Index Report published by FTI Consulting. This analysis was carried out in two parts by applying four panel-data regression models in the agency and signalling theories framework. First, the study examined the association between executive compensation, board strength, composition, gender diversity, and voluntary disclosures. Second, the article investigated the moderating role of the “Big 4” in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.FindingsThe willingness of executives to share private information with stakeholders depends on the compensation they receive from their employer. The higher compensation paid to executives leads to a higher “tone from the top,” which is better aligned with stakeholder interests. Further, the research also found that bigger board sizes, a higher proportion of independent and woman directors (indicators of good governance), and an auditor's reputation are associated with increased voluntary disclosure.Research limitations/implicationsThe findings showed that the executives' compensation and corporate governance attributes are aligned with stakeholders' demand for higher voluntary information from firms. Moreover, the study also found that the “Big 4” play a moderating role in this direction. The choice of a reputed auditor indicates the firms' long-term positive future perspectives, which strengthens investor confidence in the financial market.Practical implicationsThe study suggests that fair executive compensation can address the agency problem.Originality/valueThis research furnishes managers and different stakeholders with significant implications of executives' compensation, corporate governance, and auditor's reputation in the best interests of a firm through reducing potential risks of information asymmetry.

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“…A growing number of studies in corporate governance literature have begun to investigate the association between top managers’ characteristics and firms’ strategic decisions (Saragih and Ali, 2023; Jbir et al , 2021; Boubaker et al , 2021; Armstrong et al , 2015; Dyreng et al , 2010). For instance, previous studies have analyzed the impact of CEOs’ personal characteristics on earnings management (Bouaziz et al , 2020; Demerjian et al , 2013; Francis et al , 2008), the impact of CEO tenure and expertise on the timeliness of audited financial statements (Salehi et al , 2018), the impact of CEO incentives on tax planning strategy (Arora and Gill, 2022; García-Meca et al , 2021), on CSR (Velte, 2020) and accounting conservatism (Ahmed and Duellman, 2007). Other empirical studies investigated how CEO power affects corporate performance, strategic decisions, and executive incentives.…”

Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

The impact of CEO power on corporate tax avoidance: the moderating role of institutional ownership

Oussii,

Klibi

2023

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Purpose This study aims to investigate the relationship between chief executive officer (CEO) power and the level of tax avoidance of Tunisian listed companies. It also examines the moderating role of institutional ownership in this association. Design/methodology/approach The sample comprises 306 firm-year observations of companies listed on the Tunis Stock Exchange during the 2013–2020 period. Findings The results indicate that CEO power reduces tax avoidance levels. Moreover, the relationship between CEO power and tax avoidance is more pronounced in the presence of institutional ownership, suggesting that CEOs act less opportunistically when monitored by institutional investors, which results in a reduction in tax avoidance. Practical implications This study suggests that CEO power and institutional shareholders’ influence are important factors in determining firms’ avoidance behavior. This study has significant implications for shareholders and regulatory bodies. Indeed, shareholders apprehend the impact of appointing a powerful CEO on tax avoidance practices. This study may also provide regulators with new insights into the influence of CEO power dimensions and institutional ownership on tax aggressiveness. Originality/value This study fills the gap in the accounting literature by investigating how CEO power may impact tax avoidance behavior and provides empirical evidence on the moderating impact of institutional ownership on this relationship in an emerging economy context characterized by a weakly protected investor setting.

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Impact of executive compensation on corporate tax aggressiveness: evidence from India

Cited by 4 publications

References 66 publications

Board characteristics and CEO turnover–performance relationship: evidence from India

Board characteristics and CEO turnover–performance relationship: evidence from India

The impact of executives' compensation and corporate governance attributes on voluntary disclosures: Does audit quality matter?

The impact of CEO power on corporate tax avoidance: the moderating role of institutional ownership

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