General Counsel Prominence and Corporate Tax Policy

Abstract

Prior research provides evidence that individual executives have a significant effect on firm-level tax policy. Further research has shown that having a corporate general counsel (GC) in a firm's top management team (top five highest-paid executives) significantly affects a firm's accounting and disclosure practices. In this paper, we examine the role of the GC in corporate tax policy. Specifically, we use the ascension of the corporate GC to top management as the identifying event in which the role and influence of the corporate GC becomes more salient. We find strong evidence that GC ascension to top management is associated with an increase in tax aggressiveness, as evidenced by greater book-tax differences and a higher likelihood of engaging in tax shelter activities.

The impact of managerial ability on corporate tax risk and long-run tax avoidance: empirical evidence from a developing country

“…In this regard, taxable income was estimated as income tax expenses divided by the statutory tax rate. The use of BTD as a proxy to estimate corporate tax avoidance conformed with the previous studies (Frank et al, 2009;Taylor and Richardson, 2014;Abernathy et al, 2016;Park et al, 2016;Khurana et al, 2018;Chen et al, 2021aChen et al, , 2021b. A significant difference between pre-tax income and taxable income in the long-term indicates the extent to which several corporations may avoid taxes over periods of time.…”

A Potential Risk of Increasing Cross-National Distance: Evidence from Less Sustainable Tax Policies

“…First, it is one of the few, if not the first, research to provide detailed empirical evidence on the relationship between cross-national distances and sustainability of tax policies with a sample of Japanese listed firms. This study extends the book-tax difference studies [1][2][3][4][5][6][7]20,22,25,26] and cross-national distance studies [11,12,27,28] by providing evidence that multidimensional cross-national distance dimensions may lead to a negative effect on the sustainability of tax policies. Second, the dimensions of cross-national distance of FDI (i.e., perspectives from economic, political, administrative, cultural, demographic, knowledge, and geographical distance) and the indicator variable of sustainable tax policies provide a methodological contribution on enriching both international business and environmental studies of country characteristics and business sustainability.…”

“…Many taxation studies discuss the outcomes of book-tax difference, a proxy to represent the tax aggressive policy, from several aspects [1][2][3][4][5][6]. We define that sustainable tax policies focus on maintaining less difference between book income and taxable income over time.…”

Creativity and Innovation in the Context of Firms

“…For example, a general counsel that is a member of the senior team can help reduce the firm's explicit tax liabilities (Abernathy, Kubick, & Masli, 2016), thus increasing the firm's internal finances. In addition, the general counsel, acting as the agent of the organization in interactions with external parties, can participate in the drafting and enforcement of legal contracts of firmclient collaborations formed by the Sales department (Vashisht, 2006, p. 104) and firm-supplier collaborations formed by the Purchasing department.…”