TY - JOUR
T1 - Founder and Descendant vs. Professional CEO
T2 - Does CEO Overconfidence Affect Tax Avoidance in the Indonesia Case?
AU - Sutrisno, Paulina
AU - Utama, Sidharta
AU - Anitawati Hermawan, Ancella
AU - Fatima, Eliza
N1 - Publisher Copyright:
© 2022 by the authors.
PY - 2022/12
Y1 - 2022/12
N2 - This study aims to test whether the founder or descendants of CEOs have differences from professional CEOs in influencing the relationship between CEO overconfidence and tax avoidance. Overconfident CEOs have strong incentives to avoid taxes. However, the role of the founder or descendant CEOs is expected to mitigate the relationship between the CEO’s overconfidence and tax avoidance. This study used a sample of non-financial companies listed on the Indonesia Stock Exchange in 2012–2019 and tested random effect panel data. The results of this study show that CEO-led companies that are overconfident are more driven to tax avoidance. Meanwhile, the relationship between CEO overconfidence and tax avoidance is not influenced by the presence of a descendant, founder, or professional CEO. Indonesia as one of the countries that adheres to a two tier governance system, the founder or descendant CEO is not the only significant actor in the company but based on the upper echelon theory that role of the entire company management team that influences the company’s policy strategy. This study provides implications for developing the literature regarding the relationship between CEO overconfidence and tax avoidance. However, the relationship between CEO overconfidence and tax avoidance is not influenced by the presence of the founder, descendant, or professional CEO. Likewise, this research is useful for investors, creditors, and regulators in paying attention to the characteristics of the CEO in making decisions.
AB - This study aims to test whether the founder or descendants of CEOs have differences from professional CEOs in influencing the relationship between CEO overconfidence and tax avoidance. Overconfident CEOs have strong incentives to avoid taxes. However, the role of the founder or descendant CEOs is expected to mitigate the relationship between the CEO’s overconfidence and tax avoidance. This study used a sample of non-financial companies listed on the Indonesia Stock Exchange in 2012–2019 and tested random effect panel data. The results of this study show that CEO-led companies that are overconfident are more driven to tax avoidance. Meanwhile, the relationship between CEO overconfidence and tax avoidance is not influenced by the presence of a descendant, founder, or professional CEO. Indonesia as one of the countries that adheres to a two tier governance system, the founder or descendant CEO is not the only significant actor in the company but based on the upper echelon theory that role of the entire company management team that influences the company’s policy strategy. This study provides implications for developing the literature regarding the relationship between CEO overconfidence and tax avoidance. However, the relationship between CEO overconfidence and tax avoidance is not influenced by the presence of the founder, descendant, or professional CEO. Likewise, this research is useful for investors, creditors, and regulators in paying attention to the characteristics of the CEO in making decisions.
KW - CEO overconfidence
KW - descendant
KW - founder
KW - tax avoidance
UR - http://www.scopus.com/inward/record.url?scp=85144664876&partnerID=8YFLogxK
U2 - 10.3390/economies10120327
DO - 10.3390/economies10120327
M3 - Article
AN - SCOPUS:85144664876
SN - 2227-7099
VL - 10
JO - Economies
JF - Economies
IS - 12
M1 - 327
ER -