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Issam Laguir and Raffaele Staglianò
''How do powerful CEOs manage corporate tax aggressiveness?''
( 2014, Vol. 34 No.3 )
We explore how powerful CEOs manage the tax aggressiveness (TAG) of their firms. The agency view suggests that CEOs invest in TAG to enhance their own private benefits. On the contrary, the stream of corporate social responsibility theories argues that CEOs avoid investment in TAG as, although a corporation exists primarily to increase shareholder value, it must also satisfy the needs of its other stakeholders. Using a panel of hand-collected data from listed Italian firms, we show that the association between CEO power and TAG is non-monotonic. When the CEO is relatively less powerful, an increase in CEO power leads to less TAG engagement. However, as the CEO becomes substantially more powerful, he is more entrenched and invests more in TAG. In fact, when CEO power goes beyond a certain threshold, more powerful CEOs significantly increase TAG.
Keywords: Agency theory, corporate social responsibility, tax aggressiveness, CEO power
JEL: G3 - Corporate Finance and Governance: General
H2 - Taxation, Subsidies, and Revenue: General
Manuscript Received : Jul 02 2014 Manuscript Accepted : Jul 08 2014

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