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The Association between Agency Conflict and Tax Avoidance: A Direct Approach

Advances in Taxation

ISBN: 978-1-78441-120-6, eISBN: 978-1-78441-119-0

Publication date: 18 November 2014


This paper takes a unique approach to provide additional insight into the agency view of tax avoidance. We directly investigate the association between the presence of agency conflicts and corporate tax avoidance. Using a measure of CEO centrality, developed by Bebchuk, Cremers, and Peyer (2011), we identify settings in which agency conflicts are likely to be high. In contrast to prior literature, our primary tests do not rely on the inferences of market participants regarding tax avoidance. We find that CEO centrality is positively and significantly associated with tax avoidance. Additionally, we analyze the mediating role of monitoring by institutional investors in our setting. We find that the relation between tax avoidance and the existence of agency conflicts is strongest for firms with low levels of CEO monitoring. We also add to prior literature by investigating the implications of our setting on future accounting performance and future firm value.




We gratefully acknowledge the helpful comments from Brad Blaylock, Fabio Gaertner, Shana Clor Proell, Wendy Wilson, Mary Stanford and workshop participants at Texas Christian University.


Chyz, J.A. and White, S.D. (2014), "The Association between Agency Conflict and Tax Avoidance: A Direct Approach", Advances in Taxation (Advances in Taxation, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 107-138.



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