Founder or descendant CEOs, tax avoidance and firms' future risks: the Indonesian evidence

Purpose: This study aims to examine the impact of founder or descendant chief executive officers (CEOs) on the relationship between tax avoidance and firms' future risk. This issue is important because of an ongoing debate about founder and descendant CEOs' impacts, contributions and implications for firms. Design/methodology/approach: This study uses a sample of publicly listed nonfinancial Indonesian firms in 2012–2019, most of which are family firms and adhere to a two-tier governance system that was understudied in previous studies. The authors use panel-random effect data regression for the statistical analysis. Findings: The results demonstrate that founder or descendant CEOs do not affect the positive relationship between tax avoidance and firms' future risks. Research limitations/implications: This research supports the upper-echelon theory, arguing that top management teams affect firms' strategic policies and outcomes. Practical implications: CEOs play weaker roles in countries with a two-tier governance system than in a one-tier one. Additionally, in relation to Hofstede's cultural dimensions, Indonesia has collective and feminist characteristics that emphasize elements of togetherness and group so that firms reflect the firms' top management teams and not only CEOs. Originality/value: This research fills a research gap on the role of founder and descendant CEOs in the relationship between tax avoidance and firms' future risks by analyzing firms in Indonesia, a country with a two-tier governance system and collective and feminine cultural characteristics.