Impact of corporate tax aggressiveness on firm value: evidence from India

Arora, Taruntej Singh; Gill, Suveera

doi:10.1108/mf-01-2021-0033

Cited by 10 publications

(21 citation statements)

References 61 publications

(116 reference statements)

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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%

“…Moreover, the board of directors contains members from the promoter family or are in close relation with them (Sarkar et al , 2013), which often lack within board pressure and expression of dissent, whose presence is essential for maintaining good CG (Prasad et al , 2019). Rubber stamping by boards is another critical feature of the Indian CG system (Arora and Gill, 2022a). In addition, these family firms, if hire professional managers, will appoint those who will remain faithful to the promoters or family owners (Prat et al , 2010) even if it is not in the best interest of the shareholders.…”

Section: Introductionmentioning

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: Introductionmentioning

confidence: 99%

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

Jatana

2022

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“…In a similar study, Arora and Gill (2022a) also investigated whether there was any change in the moderating impact of CG before and after the implementation of the new legislative initiative. In their study, the authors split the sample based on the period before and after the new reform and then conducted separate regression analyses on these sub-samples.…”

Section: Additional Testsmentioning

confidence: 99%

“…In their study, the authors split the sample based on the period before and after the new reform and then conducted separate regression analyses on these sub-samples. Therefore, following Arora and Gill (2022a), the sample of the present study is also divided into two. The before period includes the FYs 2009-2010 to 2013-2014, whereas the after period includes FYs 2014-2015 to 2018-2019.…”

Section: Companies Act 2013: a Comparison Before And After New Legisl...mentioning

confidence: 99%

Corporate governance, CEO compensation, and corporate performance: evidence from India

Jatana

2022

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Purpose The purpose of this study is to examine the impact of corporate governance (CG) on chief executive officer compensation (CEO COMP) and pay–performance relationship (PPR) in Indian listed firms. Design/methodology/approach A sample of 196 companies listed on the S&P BSE 500 (Standard and Poor's Bombay Stock Exchange 500) Index has been analyzed using the panel (random effects) regression technique over the period 2010–2019. In addition, the system GMM technique was used to deal with the endogeneity issue. Findings The study found that block ownership and ownership concentration negatively impact COMP measures and PPR. Board size also had a negative direct and moderating impact on CEO COMP; however, the linkages were generally insignificant, especially for total pay. Similarly, outsider blockholders were found to be playing an insignificant role. Further, board independence positively influences COMP levels and PPR, though the results were mixed with respect to significance. Finally, CEO duality positively and significantly influences CEO COMP and PPR. A comparison before and after the new Indian Companies Act 2013 also revealed similar results, particularly in the after period. It suggests that the new legislative initiative was not effective enough in improving the CG and, hence, the alignment of pay with performance. Originality/value This study investigates the direct and moderating impact of CG on CEO COMP in the context of emerging economy India. Further, it makes a comparison before and after the introduction of the new governance reform, that is, the Indian Companies Act, 2013. Moreover, providing support to the entrenchment effect, the study reveals that large shareholders expropriate minority shareholders’ wealth by not aligning CEO pay with performance, making agency problems graver in emerging economies like India.

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“…Previous studies have examined firm value with tax planning (Astuti & Herawati, 2022;Herawati & Ekawati, 2016;Hidayat & Pesudo, 2019;Risna & Haryono, 2023;Romadhina & Andhitiyara, 2021;Tambahani et al, 2021). Furthermore, previous research has also tested firm value with tax avoidance (Afifah & Sofianty, 2022;Apsari & Setiawan, 2018;Azahra et al, 2023;Ester & Hutabarat, 2020;Lestari & Ningrum, 2018;Noviadewi & Mulyani, 2020;Nugrahanto & Gramatika, 2022;Risna & Haryono, 2023;Surbakti & Sudjiman, 2022), as well as the impact of tax aggressiveness (Anisa & Muid, 2017;Arora & Gill, 2022;Devi & Supadmi, 2018;Dewi & Dewi, 2017;Diatmika & Sukartha, 2019;Prastiwi & Walidah, 2020;Putri et al, 2022;Sugiyarti & Ramadhani, 2019;Suprihatin, 2020) on firm value. We decided to examine the results of studies on tax aggressiveness in contrast to tax planning and tax avoidance because tax aggressiveness includes activities to reduce tax payments that test the limits of the legality of tax regulations.…”

Section: Introductionmentioning

confidence: 99%

The Moderating Role of Independent Commissioner in Relationship between Tax Aggressiveness and Firm Value

Shidqi,

Darmawan,

Ramadhan

et al. 2024

Educoretax

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Tax aggressiveness poses agency problems within companies. This is due to the differing interests between investors and management. Independent commissioners play a crucial role in ensuring that the decisions made by management align with investor interests. The research aims to a further investigation of the moderation role of independent commissioners on tax aggressiveness actions undertaken by management from the investors' perspective. The sample consisted of 185 companies in the non-cyclical consumer sector listed on the Indonesia Stock Exchange (BEI) during the years 2018-2022. This research utilizes a quantitative method with a multiple linear regression model approach. The findings of the study indicate that tax aggressiveness has a positive effect on firm value, signaling that tax planning activities by management are still perceived as not overly aggressive and are in line with investor interests. The study's findings also show that independent commissioners are unable to moderate the negative impact of tax aggressiveness on firm value. This indicates that the role of independent commissioners has not yet been able to prevent tax aggressiveness actions that are not aligned with investor interests. This research fills a gap in previous studies that did not consider the role of independent commissioners as supervisors of management in decision-making. The implications of this research are that companies need to enhance the quality of independent commissioners through strengthening the selection process and there is a need for strengthened tax regulations that encourage companies to pay taxes.

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Impact of corporate tax aggressiveness on firm value: evidence from India

Cited by 10 publications

References 61 publications

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

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

Corporate governance, CEO compensation, and corporate performance: evidence from India

The Moderating Role of Independent Commissioner in Relationship between Tax Aggressiveness and Firm Value

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