FAMILY-CONTROLLED FIRMS AND BOOK-TAX DIFFERENCES

Prior studies suggest that book-tax differences (BTD) may reflect managerial tax aggressiveness. This study explores whether family-controlled firms are concerned with the family reputation (entrenching minority interests), which in turn, they engage in less (more) tax aggressiveness and have lower...

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Bibliographic Details
Published in:Commerce & Management Quarterly 2019-12, Vol.20 (4), p.337-370
Main Authors: Chen, Ching-Lung, Liu, Kuei-Lan, Chang, Hui-Chen, Wang, Hann-Pyng
Format: Article
Language:chi ; eng
Subjects:
Aggressiveness
Alternatives
Family owned businesses
Reputations
Tax legislation
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Summary:Prior studies suggest that book-tax differences (BTD) may reflect managerial tax aggressiveness. This study explores whether family-controlled firms are concerned with the family reputation (entrenching minority interests), which in turn, they engage in less (more) tax aggressiveness and have lower (higher) BTD. Namely, we investigate the relationship between family-controlled firms and book-tax differences on the listed firms in Taiwan from 1996 to 2015. Based on three measures of tax aggressiveness indicator (Tang & Firth, 2011; Tanya, Tang, & Firth, 2012), i.e., book-tax differences (BTD), normal book-tax differences (NBTD), and abnormal book-tax differences (ABTD), the empirical results are consistent with Chen, Chen, Cheng, and Shevlin (2010) findings and reveal that family-controlled firms, compared with the non-family controlled firms, are negatively associated with both book-tax differences and abnormal book-tax differences and support the reputation hypothesis. This study conducts several diagnostic checks and reveals the results are robust to various specifications.
ISSN:1994-8107