The Impact of Corporate Governance on Corporate Tax Avoidance. A Literature Review

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In this article, we review recent literature (79 articles) on the impact of corporate governance on corporate tax avoidance. Applying a stakeholder-oriented view, we find that various aspects of corporate governance, such as incentive alignment between management and shareholders, board composition, ownership structure, capital market monitoring, audit, enforcement and government relations, and other stakeholders’ pressure have a strong influence on corporate tax avoidance. Findings indicate that effective corporate governance mechanisms steer tax avoidance at its firm-specific optimal level. The classical principal-agent theory, however, fails to fully explain corporate tax avoidance as an outcome. Investigating the determinants of corporate tax avoidance requires a more comprehensive approach taking into account corporate governance institutions and all stakeholders relevant to the firm. We show that corporate governance institutions not only have the potential to increase tax avoidance, making firms more profitable, but also to limit tax avoidance to a level where the arising risks do not outweigh the benefits.

Original languageEnglish
Article number100270
JournalJournal of International Accounting, Auditing and Taxation
Number of pages29
Publication statusPublished - 01.09.2019

    Research areas

  • Management studies - Tax avoidance, tax planning, corporate governance, Stakeholder agency theory