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Board of Directors’ Characteristics and Tax Aggressiveness: Evidence from Jordanian Listed Firms

DOI: 10.4236/tel.2019.97171, PP. 2732-2745

Keywords: Corporate Governance, Tax Aggressiveness, Board Size, Board Independence, Board Compensation

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Abstract:

This study aims to examine the relationship between Board of Director’s characteristics and tax aggressiveness. Taxes are considered an additional cost to the firm and its shareholders because these taxes reduce the available cash flow. Firms tend to employ different tax aggressiveness techniques. Aggressive tax planning or strategic tax behaviors are activities generally designed to reduce tax liability that includes Tax evasion, Tax evasion and legitimate saving of taxes. This study is the first in Jordan which tests the relationship between Board of Director’s characteristics (Board Duality, Board Composition and Board Independence) on tax aggressiveness. Based on a sample of 140 Jordanian firms during the period 2013-2017, this study used regression analysis to examine the effect of board composition, board independence, CEO duality, return on assets (ROA) and firm size on the tax aggressiveness. The study found that there is a negative relationship between board composition and board independence from one side, and the tax aggressiveness from the other side. Furthermore, the study found that there is a positive relationship between board duality and tax aggressiveness. Finally, both the return on assets (ROA) and the firm size variables, which were included as control variables, were found to be positively related to the tax aggressiveness.

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