The Influence of CEO’s Demographic Characteristics on Tax Aggressiveness in Family Firm

Abstract

This research aims to analyze how the educational background, tenure, and gender of Chief Executive Officer (CEO) affect tax aggressiveness in a family firm. Independent varia­bles comprise the educational background, tenure, and gender of CEO while tax aggres­sive­­ness plays as dependent variable. In addition to those three parameters, the controlled variable also includes leverage and profitability. Population and sample of this research were taken from family firms registered in the Indonesian Stock Exchange during 2013 - 2016. With the purposive sampling, the number of total samples and sampling units in this research are 42 and 168, respectively. Furthermore, documentation techniques manifested in financial state­ment and annual report are used as data collection method where panel data regression with a fixed effect model is employed for statistical analysis. The present results demonstrate that the educational background and profitability significantly give a negative effect on the tax aggressiveness whereas the tenure and leverage considerably contribute to a positive conse­quence in the tax aggressiveness. Interestingly, it is shown that the gender factor does not substantially influence the tax aggressiveness.

Effect of CEO Characteristics Toward Tax Aggressiveness: Overview of Indonesia Family Firms

“…According to this theory, the manager can influence the value creation of firms through his style of management and personal skills (Aliani, 2014). Basically, the characteristics of the upper echelon are divided into two, namely psychological and observable (Astutik et al, 2020). Managerial characteristics as an indicator that is inherent in a manager is brought to an administrative situation by him and they are used to decide complex policies.…”

“…Tenure is one of the observable characteristics of CEO. Based on (Astutik et al, 2020), Upper Echelons Theory explains CEO tenure gives confidence to take a challenging decision in financial. The aggressiveness of a CEO in carrying out his tax planning is included in challenging or risky financial decisions.…”

“…Because if any tax regulations are violated, the consequences will be dealing with criminal acts. The longer he holds office, the more experienced and courageous the CEO will be in making decisions (Astutik et al, 2020). On the other hand, someone who has just been elected CEO will be more wary of reported corporate taxes.…”

“…(Hertwig et al, 2019), also said that in psychology, risk preference is often broadly interpreted as the propensity to engage in behaviours or activities that, although rewarding, involve the potential for loss or harm (for oneself or others). (Astutik et al, 2020), state that top management level demographic characteristics in Upper Echelons Theory include psychological and observable dimensions. Thus, it can be said that the CEO's risk preference is a psychological dimension in the characteristics of the CEO that has an influence on the policies made by him.…”

“…Profitability as a control variable also has a direct relationship with tax aggressiveness based on evidence of a relationship in previous research (Astutik et al, 2020), (Dewi et al, 2020), (Devi et al, 2019), and (Dwiyanti et al, 2019).…”