The influence of family involvement on tax aggressiveness of family firms

Abstract

Purpose – The purpose of this paper is to analyze the tax aggressiveness among family firms considering their different levels of family involvement. Based on the family influence on power, experience, and culture approach proposed by Astrachan et al. (2002), this study examines to what extent the heterogeneity among family firms generates distinctive (and unique resource) combinations of family involvement that explain different levels of tax aggressiveness. Design/methodology/approach – A sample of 282 small and medium-sized family enterprises and a structural equation modeling approach have been used to study simultaneously the effects of family influence through the power, experience, and culture dimensions of tax aggressiveness in family firms. Findings – The family influences the business’ tax aggressiveness in different ways. As such, the greater the family experience, by the incorporation of second and subsequent generations, the greater the tax aggressiveness; in contrast, greater family power in terms of firm ownership and management negatively affects tax aggressiveness. Additionally, greater alignment of the family and business culture does not exert a significant effect on tax behaviors of family firms. Practical implications – Tax aggressiveness is a complex activity that should be managed from a global point of view in family firms. Managers should compensate for the negative influence of family governance on tax aggressiveness with the positive effect of the family generations in order to obtain proper and balanced tax management that contributes to the sustainability of family firms. Originality/value – This study contributes to the understanding of tax behavior heterogeneities among family firms by going further than most research (usually based mainly on comparative ownership aspects between large, publicly quoted family and non-family firms), considering some other more representative factors of family small and medium-sized enterprises, where the influence of characteristics of family management, family generation, and family values can be the main determinants of the firm taxation policies.

Determinants of Indonesian Public Listed Companies to Participate in the Tax Amnesty

“…Tax avoidance was present in Indonesian family business practice due to different governance practices resulted from different ownership style (Pratama, 2017c). Chen et al (2010) explained that family Pratama owners have substantially higher holdings, they benefit more from tax savings or rent extraction that can be concealed by tax aggressive activities, Sánchez-Marín et al (2016) indicate that as family firms move to second or third generation, these generations were less tax sophisticated, and tend to be oriented to business, so they conduct more aggressive tax avoidance. Indonesia family business is now owned by second and third generation, so it explained why the level of tax avoidance is high and if tax amnesty can forgive all the tax mistakes, the family owners will reach it.…”

“…Steijvers & Niskanen (2014) argue that family firms tend to avoid the practice that can damage the company reputation, including aggressive tax avoidance. However, Sánchez-Marín et al (2016) indicate that as family firms move to second or third generation, these generations were less tax sophisticated, and tend to be oriented to business.…”

Family involvement and hotel online reputation

“…Third, basing on several sources of theories, measures and methodologies, our paper entails an integral analysis of the family influence ---that include ownership and management ---allowing a global examination of how family governance heterogeneity affects online reputation among family hotels (Chua et al, 2012;Michiels et al, 2013). And fourth, our paper shows new evidence regarding the Spanish hotel context, one of the world's most prominent hospitality industry ---holding the second position in world tourism, in terms of both number of travellers (after France) and revenues (after USA) (Pereira-Moliner et al, 2010) ---and very well representative of typical family firms ---with a concentrated shareholder base as well as a high proportion of family members active in management (Merino et al, 2015;Sánchez-Marín et al, 2016), which can be a particularly appropriate context for studying the influence of family on hotel reputation.…”

Family governance and family firm outcomes

“…Chrisman et al (2005, p. 244) suggest that these three dimensions indicate "a family's ability and willingness to influence the direction of a business, as well as the depth to which a family's influence is likely to have affected business decision making." In the Special Issue, Sanchez-Marin et al (2016) demonstrate that these family influence dimensions have differential impact on tax aggressiveness tendencies in family firms.…”