Managerial Ability and Tax Avoidance Adjustment toward the Optimal Level

초록

We examine the association between managerial operating ability and the speed at which firms adjust tax avoidance towards the optimal level. Using a managerial ability construct that measures how effectively corporate resources are utilized to generate revenue we find a negative association between managerial ability and the speed of tax avoidance adjustment towards the optimal level. This finding remains robust after employing propensity score matching method and instrumental variable approach. Collectively, this study suggests that competent managers do not always choose the optimal tax strategies, possibly due to limited focus on multiple tasks.