Family business research suggests that the population of family firms cannot be regarded as a homogenous group. Therefore, with respect to tax avoidance, we analyze the role of the founder as one dimension of family firm heterogeneity. Specifically, we consider socioemotional wealth loss aversion and find that founders may affect the level of tax avoidance not only when they have direct influence (i.e., serving as CEO) but also when they possess solely indirect influence (i.e., having substantial ownership or a seat on the board). Overall, our results suggest that founders remain attached to their firms despite giving up executive positions.

There is an ongoing debate in the U.S. about the effect of book-tax conformity on earnings management in consolidated statements. Although both one- and two-book systems are present in Europe, European data have not been used to contribute to this debate. In this study, we examine the influence of one- and two-book systems on earnings management using consolidated statements and single financial statements of European firm-years from 2004 to 2011. A one-book system is defined as a situation in which financial accounting income and taxable income are highly conformed, whereas a two-book system is characterized by differences between consolidated financial income and taxable income. We find that firms in one-book systems show significantly more (downward) earnings management in their consolidated statements than do firms in two-book systems. With these findings, we contribute to the U.S. policy debate on book-tax conformity and earnings management.

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Purpose The purpose of this paper is to test if companies with a greater concentration of management ownership (and thus more risk-averse managers) avoid less tax. Design/methodology/approach The authors use a regression analysis with panel data, using as a sample of Brazilian companies from 2001 to 2015. The authors investigate the impact of insider ownership on tax avoidance, testing how and how much different ownership levels of inside owner are associated with tax avoidance measured by effective tax rates and book-tax differences. Findings The results indicate that different levels of management ownership are associated with different levels of tax avoidance behavior. Originality/value This paper contributes to the literature showing that ownership and decision making are not always focused on only a few decision makers. The owners are likely to be more risk averse and therefore less willing to invest in risky projects such as tax avoidance.

Audit target selection, Experiments, Benford’s Law, Tax audit, Noncompliance, H26, C91,

This study simultaneously distinguishes between private family firms, private nonfamily firms, public family firms, and public nonfamily firms. We show that private family firms avoid taxes less than public family firms and public nonfamily firms; however, we do not find a difference between private family firms and private nonfamily firms. Therefore, building on family firm heterogeneity, our results indicate that tax avoidance in private family firms differs depending on the involvement of nonfamily owners and/or managers. We find that private family firms that are wholly owned and managed by family members indeed avoid taxes less than private nonfamily firms.

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This paper investigates the associations of auditor-provided tax services (APTS) with tax planning and audit quality using a German sample. Our findings differ from those of previous U.S. studies, which we attribute to the fact that prior to 2015, the International Financial Reporting Standards (IFRS) did not contain a clear regulation similar to FIN 48, which requires firms to reserve for tax uncertainties. We find for our IFRS sample a negative association between APTS and tax avoidance, which suggests that auditors are aware that firms might not reserve for tax uncertainties and may advise more conservative tax strategies. Additionally, we find a positive relation between the level of APTS and the sustainability of tax strategies in client firms, consistent with this conservative approach. Furthermore, our results show that APTS are positively related to audit quality for our sample. This finding suggests that auditors, being aware of remaining tax uncertainties that are not reserved for, are more reluctant to accept earnings management, which would further increase the risk of restatement. Taken together, the results of our study suggest the importance of accounting standards regarding tax uncertainties for the implications of APTS.