Impacts of Managerial Ability on Tax Avoidance

Abstract

Management by tax avoidance may follow appropriate reporting that presents the firm with more profit than reality, and to show a good delineation of firm proceeds. However, able managers are less involved in tax avoidance action because of its opportunity cost. The aim of this study is examining the effects of management ability on tax avoidance. A sample of 91 firms accepted in the Tehran Stock Exchange from 1384 to 1392 was selected. In this study management ability criterion was considered a part of firm efficiency which was not affected by inherent factors, and was calculated by data envelopment analysis method. Also, the average of cash payment in the next three years divided to the average of taxes in the same period was regarded as tax avoidance criterion. Finally, test of hypothesis was carried on by synthetic regression. The result showed that management ability has significant negative relationship with tax avoidance.

Keywords

• managerial ability
• firm efficiency
• tax avoidance
• cash effective tax rate