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 corporate cultural dimensions influence the internal information flows within an organization in different ways, ultimately influencing corporate tax planning. Hierarchical control cultures foster bureaucracy, which negatively impacts the information flows, ensuing in less optimized tax planning. Collaborative cultures embrace flat hierarchies that positively influence information 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 do not find evidence that collaboration-oriented cultures achieve these corporate tax savings by engaging in aggressive corporate tax sheltering activities.
Original languageEnglish
Title of host publicationProceedings of the EAA Annual Congress 2022
Publication date2022
Publication statusPublished - 2022
MoE publication typeA4 Article in conference proceedings

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

  • AoS: Financial management, accounting, and governance

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