Corporate Culture and Tax Planning

Mansoor Afzali*, Timmy Thor

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientificpeer-review

Abstract

We study the effects of corporate culture on tax planning. Using the competing value framework and natural language processing techniques, we quantify internally oriented corporate cultural dimensions of control and collaboration. We predict that these dimensions of corporate cultural influence intra-organizational knowledge flows in different ways, ultimately influencing corporate tax planning. Hierarchical control cultures foster bureaucracy, which negatively impacts intraorganizational knowledge flows, ensuing less optimized tax planning. In contrast, collaboration-oriented cultures embrace flat hierarchies that positively influence intraorganizational knowledge flows, resulting in more efficient tax planning. Our empirical findings are consistent with these predictions: firms with control-oriented (collaboration-oriented) cultures have higher (lower) GAAP and cash effective tax rates. We find some evidence to suggest that collaboration-oriented cultures achieve these corporate tax savings by engaging in aggressive tax sheltering activities and that such tax savings are value-enhancing.
Original languageEnglish
Title of host publicationProceedings of the EAA Annual Congress 2022
Publication date2022
Publication statusPublished - 2022
MoE publication typeA4 Article in conference proceedings
EventAnnual Congress of the European Accounting Association (EAA) - Bergen, Norway
Duration: 11.05.202213.05.2022
Conference number: 44

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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