2020 - Managerial Acquisitiveness and Corporate Tax Avoidance

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/327182683
Managerial acquisitiveness and corporate tax avoidance
Article in Pacific-Basin Finance Journal · August 2018

DOI: 10.1016/j.pacfin.2018.08.010
CITATIONS READS
10 130
3 authors, including:
Mehdi Khedmati Syed Shams

Monash University (Australia) University of Southern Queensland
13 PUBLICATIONS 74 CITATIONS 48 PUBLICATIONS 161 CITATIONS
SEE PROFILE SEE PROFILE
All content following this page was uploaded by Syed Shams on 12 May 2021.
The user has requested enhancement of the downloaded file.

Pacific-Basin Finance Journal 64 (2020) 101056
Contents lists available at ScienceDirect
Pacific-Basin Finance Journal

journal homepage: www.elsevier.com/locate/pacfin
Managerial acquisitiveness and corporate tax avoidance

T
Ferdinand A. Gula, Mehdi Khedmatib, , Syed M.M. Shamsc
⁎
a
Deakin University, Australia
b
Monash University, Australia
c
University of Southern Queensland, Australia
ARTICLE INFO ABSTRACT
Keywords: This paper draws on the “tone at the top” literature to investigate whether managers of firms with
Mergers and acquisitions managerial acquisitiveness also engage in corporate tax avoidance. Using a sample of US ob-
Managerial acquisitiveness servations, we find that there is a statistically significant association between firm acquisition
Tax avoidance and CEOs overconfidence decisions and corporate tax avoidance. This finding remains robust in a series of sensitivity tests
JEL: including controlling for the CEO's involvement in hyping stocks. We also show that the effect of
G32 acquisitiveness on tax avoidance is more prevalent when audit quality is low, CEOs' equity
G34 compensation is low and/or increases in post-acquisition period, and when firms announce ac-
quisitions which destroy shareholder wealth, suggesting opportunistic behavior of CEOs is a key
driver of tax avoidance. This finding is consistent with the idea that managers of firms that make
self-maximizing decisions at the cost of shareholders in the form of high M&A activities within a
short period of time are also engaged in tax avoidance. Consistently, further analysis shows that
when high acquisitive managers implement tax avoidance, they destroy firm value in the post-
acquisition period.
1. Introduction
In this study we draw on the literature on “tone at the top” to examine the relationship between managerial acquisition behavior
and firm tax avoidance activities. Prior studies on the determinants of tax avoidance policies focuses on personality differences
among top managers (Francis et al., 2016). The focus on these differences of top executives is inspired mainly by upper echelons theory
(Carpenter et al., 2004; Finkelstein et al., 2009; Nielsen, 2010). The central idea in this theory is that the organization “is a reflection
of its top managers” and that organizational strategies and outcomes are heavily influenced by individual top managers and their
personal characteristics (Hambrick and Mason, 1984). A related concept is the idea of “tone at the top” which may be defined as the
entity wide attitudes of integrity and control consciousness demonstrated by the most senior managers of the firm (Bartlett and
Preston, 2000). It may be inferred from the actions and activities of the senior managers. We argue that high managerial acquisition
behavior is a reflection of tone at the top.
We are motivated to examine this issue for the following reasons. First, there has been increasing interest among practitioners and
academics regarding corporate tax avoidance in the US.1 For example, according to an article published by The Economist in
Corresponding author at: Department of Accounting, Monash University, Clayton Campus, Australia.
⁎
E-mail addresses: ferdinand.gul@deakin.edu.au (F.A. Gul), Mehdi.Khedmati@monash.edu (M. Khedmati),

syed.shams@usq.edu.au (S.M.M. Shams).
1
See “The corporate Tax Game” by Graham Bowley, The New York Times, May 2, 2013. Available at http://www.bloomberg.com/bw/stories/
2003-03-30/the-corporate-tax-game. Additionally, see “The Price isn't right”, The Economist, September, 21st, 2012. Available at:
http://www.economist.com/blogs/schumpeter/2012/09/corporate-tax-avoidance.
https://doi.org/10.1016/j.pacfin.2018.08.010
Received 15 August 2017; Received in revised form 24 May 2018; Accepted 14 August 2018
Available online 23 August 2018
0927-538X/ © 2018 Published by Elsevier B.V.
F.A. Gul, et al. Pacific-Basin Finance Journal 64 (2020) 101056
September 2012, there is widespread tax avoidance by American multinationals through the use of loopholes in America's tax code to
“bring some of that cash home without triggering a liability” (footnote 1). The General Accounting Office's (GAO) 2008 report on
corporate tax liabilities states that “nearly 55 percent of all large US controlled corporations reported no federal tax liability at least
one year between 1998 and 2005”.2 Further, according to a recent Harvard University study, U.S. companies avoided paying tax on
nearly $300 billion in income in 1998.3 In line with these concerns, Huseynov and Klamm (2012) point out that a large group of the
most profitable corporations' shelter half their profits from taxes. Given these reports and interest, it comes as no surprise that there
have been calls for further investigation on whether top management risk profile/appetite for tax aggressive strategies exacerbates
the agency problems between the firm and its stakeholders (Kanagaretnam et al., 2016).
Second, prior studies directly or indirectly, suggest that the executive's personal characteristics and style could influence the
organizational investment policy and tax culture (Blaufus and Zinowsky, 2013; Francis et al., 2016). For example, Frank et al. (2009)
find that the aggressive corporate “tone and culture” are associated with aggressive financial and tax reporting. Dyreng et al. (2010)
show that the educational and professional backgrounds of individual top executives play a significant role in determining the level of
tax avoidance that firms undertake. Similarly, Armstrong et al. (2015) suggest that managerial risk-taking incentives could be a main
motivation to take high-risk tax positions. Chyz (2013) finds that executives' who are aggressive in their personal tax matters are also
found to be implementing aggressive tax policies in their firm. Olsen and Stekelberg (2016) document evidence that CEO narcissism
is positively associated with corporate tax sheltering activities. Chyz et al. (2015) show that overconfident CEOs are associated with
more tax avoidance. Hence, Hanlon and Heitzman (2010) state that many of the determinants of tax avoidance still remain unclear
and call for further exploration to better understand why managers undertake aggressive tax planning. In this paper we draw on
agency theory and use M&A activities as a proxy for managerial entrenchment and examine whether the acquisitive “tone at the top”
style of the firm translates into complex tax avoidance.
More specifically, in this paper we extend this line of research by examining whether acquisitive managers (managers who
undertake frequent mergers and acquisitions in a given fiscal year) who engage in tax avoidance increase efficiency or seek private
benefits from the firm. There is an argument in the M&A literature that managers engage in M&A decisions to gain private benefits of
control as suggested by Jensen's (1986) agency theory.4 On the other hand, several studies show that managers implement mergers
and acquisitions to create value for shareholders (Seth, 1990; Bradley et al., 1988; Malatesta, 1983). In both of these contexts
managers have incentives to implement aggressive tax practice to reduce tax liability or derive private benefits from tax savings. Our
paper directly investigates whether managerial motive and tone at the top as reflected in M&A activities drive the aggressive tax
positions using managerial acquisitive behavior. While we believe that managerial overconfidence is related to managerial acqui-
sitiveness, it is a distinct construct since managerial acquisitiveness can also be a proxy for entrenched managerial decisions.5
The tone at the top in M&A decisions could be that managers should pursue the decision to create synergies and improve
efficiency of the firm (Seth, 1990; Bradley et al., 1988; Malatesta, 1983). Mergers and acquisitions create value by reducing the cost
from centralized R&D-departments or enforcing clear-cut responsibilities in general management functions, opening joint activities in
foreign markets and increasing returns to scale in production are potential sources of synergies. Neoclassical view of corporate tax
management suggests that, after accounting for non-tax costs and implicit taxes, any action that reduces a firm's tax bill increases
after tax returns and thus adds to the firm's value (Sims et al., 1992). Risk-neutral shareholders expect that tax avoidance should be
accretive to firm value if its after-tax benefits exceed its net-tax costs. Therefore, if tone at the top is in line with efficiency of the firm,
we expect that managers who engage in value creating M&A decisions also exhibit similar approach in implementing tax strategies
for the firm which increase the after tax cash flow of the firm.
On the other hand, the tone at the top in M&A decisions could be that managers make the decisions with the self-maximizing
objective of growing the firm beyond the optimal size, increasing the number of new plants or acquiring new companies for status,
prestige, power and high compensation or private benefits (Jensen and Meckling, 1976; Jensen, 1986; Stulz, 1990; Masulis et al.,
2007; Hope and Thomas, 2008). Consistently, a number of prior studies suggest that acquisition deals are generally intended to
satisfy executives' personal gain and destroy value for shareholders6 (Antoniou et al., 2008; Gupta and Misra, 2007; Sudarsanam and
Mahate, 2006; Andrade et al., 2001). In the same vein, tax literature also argues that managerial opportunistic and rent seeking
behaviors are linked with tax avoidance activities (Desai and Dharmapala, 2006; Desai et al., 2007 and Desai and Dharmapala,
2009b). A number of recent studies provide evidence that tax avoidance activities are related to self-serving decisions of corporate
managers that destroy firm value (e.g., Rego and Wilson, 2012; Chen et al., 2010; Desai and Dharmapala, 2009b, Desai and
Dharmapala, 2006; Desai, 2005; Desai et al., 2007). Therefore, if tone at the top requires opportunistic decisions, we expect that
managers who undertake aggressive M&A decisions continue this risky behavior and engage in more tax avoidance than shareholders
would otherwise prefer.7
2
See http://www.gao.gov/products/GAO-13-520.
3
“Special Report: The Corporate Tax Game—How blue-chip companies are paying less and less of the nation's tax bill,” by Nanette Byrnes & Louis
Lavelle, BusinessWeek, March 31, 2003, pp. 79–87.
4
It is difficult to gauge whether an acquisitive manager is also overconfident because in many instances CEOs option holding data, needed for
calculating overconfidence are not available for the M&A sample. In our M&A sample firms, 46.14% of M&A firms do not have CEOs option holding
data.
5
In addition, Malmendier and Tate (2008) argue that CEO overconfidence may not be related to more acquisitions. They, however, find that
overconfident CEOs are more likely to make lower quality acquisitions when their firm has unlimited internal resources.
6
Acquiring shareholders lost over $220 billion at the announcement of merger bids from 1980 to 2001 (Moeller et al., 2005).
7
M&A activities are still popular; in 2014, the current M&A boom is near a peak that is similar to the 2006–07 period. Prior to global financial
2
We use M&A activities of the firm as a proxy for managerial characteristics and tone at the top. We, therefore, define managerial
acquisitiveness using three measures: (1) ACQPR as the probability of making merger and acquisition announcements in a given fiscal
year, (2) the total number of acquisitions announced during a fiscal year (ACQNO) and (3) the proportion of the total dollar value of
the deal in a fiscal year relative to the market value of equity of a bidder in the pre-acquisition fiscal year (ACQVALUE). We adopt
several standard measures of tax avoidance commonly used in prior studies (e.g., Hanlon and Heitzman, 2010; Chen et al., 2010;
Dyreng et al., 2010; Dyreng et al., 2008; Phillips, 2003; Rego and Wilson, 2012; Wilson, 2009; Rego, 2003; Mills et al., 2003). The
main measures include both short and long run CASH ETR measures of tax avoidance. We also use two more aggressive measures,
namely, SHELTER and UTB (Unrecognized Tax Benefits) as additional tax measures.
Using a sample of 11,327 M&A transactions obtained from the Securities Data Corporate (SDC) database for the 1991–2015
period, after controlling for the effect of common determinants of tax avoidance, we provide strong evidence that the managerial
acquisitiveness is associated with tax avoidance. Specifically, we find that, compared to non-M&A firms, M&A firms are associated
with higher tax avoidance. Further, within M&A firms, those that appear to undertake frequent and make large dollar value ac-
quisitions are associated with higher tax avoidance, suggesting that the managerial acquisitiveness is strongly related to tax
avoidance. The results remain robust to using controlling for board characteristics, alternative proxies for tax measures and man-
agerial acquisitiveness, and controlling for endogeneity concern through Heckman self-selection tests and a propensity score
matching (PSM) analysis. We also control and test the effect of pre-acquisition stock hyping, pre-acquisition information environ-
ment, audit quality, CEO's equity compensation, acquisitions value and the impact of CEO's overconfidence in our analysis. The
analysis suggests that the tone at the top that promotes opportunism is the main driver of tax avoidance. Finally, we show that
managerial acquisitive tendency increases the negative effect of corporate tax avoidance on future profitability of the firm.
Corporate tax avoidance has been a major issue and widespread in a number of countries located in Asia-Pacific markets.8 Recent
studies provide evidence that there is a significant relationship between corporate social responsibilities, board of director compo-
sition, board of director oversight and tax aggressiveness in Australian firms (Lanis and Richardson, 2011, 2012; Richardson et al.,
2013; Chan et al., 2013). Most notably, Chen et al. (2013) show that tax avoidance is prevalent in non-government-controlled firms
than government-controlled firms in Chinese market. However, there is a paucity of research in Asia-Pacific markets which directly
links acquisitiveness and corporate tax avoidance. Our study contributes in this line of literature by showing that acquisitiveness is
one of the important organizational determinants of tax avoidance, which has been ignored in prior research. Our findings would
provide evidence to regulators and standard-setters in different jurisdictions including Asia pacific markets where takeover market is
very active.
The remainder of the paper is organized as follows. Section 2 discusses prior literature and develops the hypotheses. Section 0
explains the research methodology, and Section 3 describes the sample selection and descriptive statistics of the data used in the
paper. The results are presented in Section 4. We summarize and conclude the study in Section 5.
2. Literature review and hypothesis development
We draw on the literature on “tone at the top” to examine the relationship between managerial acquisition and corporate tax
avoidance. This literature generally defines tone at the top as the entity wide attitudes of integrity and control consciousness de-
monstrated by the most senior managers of the firm (Bartlett and Preston, 2000). The underlying theory for this concept is upper
echelons theory (Carpenter et al., 2004; Finkelstein et al., 2009; Nielsen, 2010) which suggests that the organization “is a reflection of
its top managers” and that organizational strategies and outcomes are heavily influenced by individual top managers and their
personal characteristics (Hambrick and Mason, 1984). We argue that high managerial acquisition behavior is a reflection of tone at
the top and therefore could be associated with corporate tax avoidance policies which have been shown to be dependent on per-
sonality differences among top managers (Francis et al., 2016).
The tone at the top in M&A decisions could be that managers should pursue the decision to create synergies such that the value of
the combined entity exceeds the sum of its component parts (Seth, 1990; Bradley et al., 1988; Malatesta, 1983). As such, in line with
efficiency hypothesis developed in Positive Accounting Theory (Holthausen, 1990), managers make M&A decisions to create value for
the firm through increasing scale in production, reducing overhead cost and improving managerial efficiency of the firm. On other
hand, bidding firm managers may engage in M&A to pursue their personal gains and benefits at the expense of shareholders. Con-
sistent with opportunism hypothesis developed in Positive Accounting Theory (Holthausen, 1990), a number of studies show that M&
As are directly related to tendency of firm managers to build empire by growing the firm beyond the optimal size and by increasing
the number of new plants or by acquiring new companies for status, prestige, power and high compensation or private benefits
(Jensen and Meckling, 1976; Jensen, 1986; Stulz, 1990; Masulis et al., 2007; Hope and Thomas, 2008). These studies show that M&A
(footnote continued)
turmoil US firms spent a total amount of 462 billion on completed M&A deals in the year 2014 (source: Mergers and Acquisitions database of
Thomson Financial's SDC Database).
8
An article published in ABC news in 2017 states that one-third of Australia's 200 biggest listed firms pay an average effective rates of 10% or less
(see the link for more details - http://www.abc.net.au/news/2017-11-13/paradise-papers-show-the-corporate-tax-debate-is-pointless/9141214).
The tax authority in China also warns that it will investigate the complicated transactions and corporate restructuring to ensure that they are not
intended for tax avoidance (See: http://www.scmp.com/news/china/article/2084092/new-chinese-tax-rule-take-aim-multinationals-profit-
shifting).
3
decision of a firm destroy shareholder wealth in a massive scale (Moeller et al., 2005). Managers of acquisitive firms have incentives
to make more self-maximizing decisions that may not be in the best interest of shareholders (Hope and Thomas, 2008). In particular,
several studies in this line of research, document that the degree of acquisitive behavior is directly linked to empire building motive
and is detrimental to shareholder value (Chhaochharia et al., 2012; Malmendier and Tate, 2008; Doukas and Petmezas, 2007; Brown
and Sarma, 2007).
The same arguments could be applied to corporate tax avoidance policies. The neoclassical view of tax management suggests that,
after accounting for non-tax costs and implicit taxes, any action that reduces a firm's tax bill increases after tax returns and thus adds
to the firm's value (Sims et al., 1992). This view supports the conjecture that tax avoidance practice is also positively associated with
firm value supporting the efficiency theory of firm. Risk-neutral shareholders argue that tax avoidance should be accretive to firm
value if its after-tax benefits exceed its net-tax costs. As such, shareholders expect that cash savings from tax avoidance provide
opportunities for further investments, which in turn, increase the firm value. Desai and Dharmapala (2009a) show that tax avoidance
activities increase the firm value for good governed firms which place better monitoring mechanism. Contrariwise, Desai and
Dharmapala (2009a) argue that complex tax avoidance transactions can create a shield for managerial opportunism and resource
diversion. Kim and Zhang (2011) also reaffirm the agency perspective of tax avoidance by investigating the crash risk and tax
avoidance.
When managers implement M&A decisions with synergistic motive, we can expect that managers of such firms tend to act in the
best interest of the shareholders to pursue wealth maximization for shareholders. Similarly, a firm's strategy to reduce or avoid its
taxes may target the sole purpose of reducing corporate tax obligations which may benefit shareholders (Phillips, 2003; Hanlon and
Slemrod, 2009; Robinson et al., 2010). We can, therefore, argue that managers of M&A firms that implement M&A decisions to create
value for the shareholders also carry out tax avoidance to accumulate larger cash balance and resources to create value for the firms.
On the other hand, managers in M&A firms could have a tendency to grow beyond the optimal size by increasing the resources under
their control by making more acquisitions for status, prestige, power and high compensation. This empire building incentive is likely
aligned with the managerial opportunistic tax avoidance strategies which aim to extract rent. Lennox et al. (2013) show evidence that
managers undertake aggressive tax positions to employ earnings manipulation. A number of recent studies provide evidence that tax
avoidance activities can facilitate managerial opportunism and diversion (Desai and Dharmapala, 2009b; Desai and Dharmapala,
2006; Desai, 2005; Desai et al., 2007; Chen et al., 2010; Rego and Wilson, 2012). Therefore, we argue that acquisitive managers may
create obfuscation to facilitate transactions that reduce corporate taxes and divert corporate resources for private use (Desai et al.,
2007).
Taken together, drawing on tone at the top, both these contrasting motives of M&A and tax avoidance suggest that high ac-
quisitive managers tend to be more aggressive in their tax strategies compared to low acquisitive managers. Hence, we postulate the
following hypothesis:
H1: Firms with higher managerial acquisitiveness are associated with more tax avoidance
However, the positive association between managerial acquisitiveness and tax avoidance may not be uniform across all firms with
different managerial acquisitive tendencies. Managers who are opportunistic have a higher incentive to induce activities that lead to
more private benefits to them when managers' interest is not perfectly aligned with that of shareholders. Moeller et al. (2005) show
opportunistic managerial motive of corporate acquisitions destroy shareholder wealth in a massive scale from 1998 through 2001 by
high valuation firms. Graham et al. (2013) and Chatterjee and Hambrick (2007) also unveil that personal traits such as CEO over-
confidence, narcissism and psychological attitudes influence the corporate financial policy choices such as M&A activities. Heaton
(2002) and Doukas and Petmezas (2007) argue that overconfident managers believe that they have superior managerial skills and are
more competent than others, and this motivates them to take more risk in terms of, for example, frequent and large dollar value
acquisitions. Similarly, Malmendier and Tate (2008) argue that, when overconfident managers have access to sufficient internal
resources such as large cash holdings or a riskless debt capacity, they are unambiguously more likely to conduct M&A and overpay for
target companies. In the same vein, prior tax literature also unveils that personal attributes of managers explain the cross sectional
variation in corporate tax sheltering. For example, Dyreng et al. (2010) show that individual top executives have incremental effects
on the tax avoidance activities that cannot be explained by firm characteristics. Chyz et al. (2015) document that executives who are
associated with tax evasion in their personal tax payment is positively related with the corporate tax sheltering. Cronqvist et al.
(2012) investigate whether specific CEO actions in his/her personal life affect the actions they take in their professional life and find
that when CEOs take on larger amounts of leverage in their personal finances, they undertake similar leverage at the firms they
manage. Frank et al. (2009) uncover a positive relation between financial reporting aggressiveness and tax aggressiveness, consistent
with managerial aggressive behavior reflects in the corporation they run. Therefore, we expect that acquisitive managers with
opportunistic behavior continue to pursue their motives in implementing tax strategies. Therefore, we postulate the second hy-
pothesis as follows:
H2: The association between acquisitiveness and tax avoidance is more pronounced in opportunistically motivated acquisitions.
3. Methodology
3.1. Measures of tax avoidance
The tax avoidance literature has introduced a variety of measures for tax avoidance. These measures indicate the amount and type
of tax benefits generated from the firm's tax positions (Lisowsky et al., 2013). To measure the bidding firms' tax avoidance activities,
we employ both short and long run standard measures of tax avoidance. Following Dyreng et al. (2008), we use CASH ETR and CASH
4
ETRLTR as short and long run measures of tax avoidance. The CASH ETR, is calculated as the firm's cash taxes paid divided by the
pretax accounting income (adjusted for special items). Because increases in tax avoidance are likely to be less valuable to loss-making
firms with no current tax liability, we follow Dyreng et al. (2008) and remove these firms from our analysis; then, CASH ETR is
truncated so that the largest observation is 1 and the smallest is 0. According to Dyreng et al. (2008), we also use five years rolling
measures of CASH ETRs as long run measure of tax avoidance. We compute the total tax paid over five years prior to acquisition
announcement divided by the sum of pretax book income over the same period.
Although the above two measures of corporate tax avoidance are not explicitly designed to capture tax sheltering, to some extent,
they reflect perfectly legitimate tax positions. Following, Wilson (2009), Rego and Wilson (2012), and Lisowsky et al. (2013), we also
use two more aggressive measures of corporate tax strategies, namely, SHELTER and UTB (Unrecognized Tax Benefits) as additional
tax measures. SHELTER is calculated based on several firm-specific characteristics defined in Wilson (2009) that influence the
probability that a firm is engaged in tax sheltering. UTB represents the amount of income taxes associated with uncertain tax
positions and thus is one proxy for risky tax planning. UTB is calculated based on the estimated coefficients of the prediction model
defined in Rego and Wilson (2012) and represents the amount of income taxes associated with uncertain tax positions. To conserve
the space, we report our main results based on short and long run CASH ETR.
3.2. Measures of managerial acquisitiveness
We use three proxies to capture managerial acquisitiveness. We use ACQPR as the measure of managerial acquisitiveness which
captures the probability of making mergers and acquisitions announcement in a given fiscal year. We, then use two other measures of
managerial acquisitiveness in the M&A sample. Our first proxy is the total number of acquisitions announced during a fiscal year
(ACQNO) as a proxy for managerial acquisitiveness (Doukas and Petmezas, 2007; Levi et al., 2014). According to Levi et al. (2014),
the number of acquisition announcements is an over-dispersed count variable, whose variance is significantly greater than its mean.
Following Malmendier and Tate (2008) and Doukas and Petmezas (2007), we argue that, when a bidding firm invests heavily in
mergers and acquisitions in a given fiscal year, this behavior is an appropriate indicator of the entrenched managerial action.
Therefore, our second proxy for managerial acquisitiveness is ACQVALUE, which is the ratio of the deal value to the market capi-
talization of the bidding firm, measured as the total dollar value of the deal in a fiscal year normalized by the market capitalization of
the bidding firm in the pre-acquisition fiscal year (Yim, 2013; Dowling and Aribi, 2013). We use 66,824 completed public, private
and subsidiary acquisition announcements made by US listed firms from 1991 to 2015 to construct these two managerial acquisi-
tiveness variables (ACQNO and ACQVALUE) for our sample firms.
3.3. Multivariate model
We estimate the following OLS regression model to test our first hypothesis:
TAXAVOIDANCEit = 0 + 1 ACQit + i CONTROLSit + i INDit + i YEARit + it (1)
where all of the variables are defined in Appendix 1 and discussed below. The dependent variable (TAXAVOIDANCE) is any of two
measures of tax avoidance discussed above (CASH ETR and CASH ETRLT). The test variable (ACQ) is a measure of managerial
acquisitiveness and is defined as above. To test the first hypothesis, we use three proxies of managerial acquisitiveness (ACQPR,
ACQNO & ACQVALUE) as test variables on two proxies of tax avoidance (CASH ETR and CASH ETRLT). We expect a negative
coefficient on ACQ to provide support for our first hypothesis. We use ACQNO and ACQVALUE to test our second hypothesis using the
M&A sample firms. We examine how the relationship between managerial acquisitiveness and corporate tax avoidance is moderated
by the role of auditors, CEO's equity incentive, acquisitions value and CEO's overconfident trait. We expect significant positive
coefficients of the interaction variables when CEOs have large equity incentive and make value creating acquisition decisions for the
firm. Finally, we expect that managerial acquisitiveness should have more explanatory power than CEO's behavioral trait while
explaining the corporate tax avoidance tendency of the firm.
The vector of CONTROLS contains the control variables used in prior studies (e.g., Dyreng et al., 2010; Wilson, 2009; Rego and
Wilson, 2012) to capture the effect of other determinants of tax avoidance. We control a wide range of time-varying firm-level
characteristics, including EBITDA, R&D, ADV, SG&A, CAPEX, ΔSALES, LEV, CASH, FOREIGN, LOSS, SIZE, INTAN, PPE. ε is the error
term. Finally, the 48-industry classification codes by Fama and French (1997) and the year indicators representing our study period
are included to control for the industry and time fixed effects. The regression results presented in all analyses are based on two-tailed
tests and p-values are calculated using standard errors which are clustered by firm (Petersen, 2009).
4. Sample selection and descriptive statistics
4.1. Data and sample selection
The data used in this study are obtained from several sources. We obtain all the merger and acquisition announcements (66,824)
made by US listed firms during the 24-year period from January 1991 to December 2015 from the Thomson Reuters SDC Platinum
Mergers and Acquisitions database (SDC Platinum). To be included in our sample, an acquisition announcement should only be an
acquisition of a public company, private firm or subsidiary of a publicly listed firm. Following Shen et al. (2014), Bris (2005) and King
5
Table 1
Sample selection and distribution.
Firm-years between 1991 and 2015 from Compustat 261,644
Less firm-years with missing accounting data (213,505)

Full sample 48,139
Acquisition announcements between 1991 and 2015 from SDC Platinum 66,824
Less merged multiple acquisition announcements by deal value (37,043)
Less firm-years with missing accounting data (18,454)
M&A sample 11,327
Panel B: Industry distribution

Full sample N % M&A sample N %
Business services 4759 9.92 Business services 1353 11.98
Retail 3261 6.80 Electronic equipment 681 6.03
Electronic equipment 2620 5.46 Machinery 570 5.05
Utilities 2449 5.11 Retail 558 4.94
Wholesale 2243 4.68 Computers 490 4.34
Machinery 2122 4.43 Wholesale 473 4.19
Petroleum and natural gas 2063 4.30 Petroleum and natural gas 461 4.08
Computers 1460 3.04 Medical equipment 432 3.83
Transportations 1460 3.04 Pharmaceutical Products 426 3.77
Medical equipment 1415 2.95 Measuring and Control Equipment 357 3.16
Remaining industries 24,287 50.45 Remaining industries 5526 48.79
Total 48,139 100 Total
This table reports the sample selection procedure and industry classification (based on the 48 industry groups of Fama and French (1997).
(2009), we exclude leveraged buyouts, spinoffs, recapitalizations, self-tenders, exchange offers, repurchases, minority stock pur-
chases, acquisitions of remaining interest, and privatizations. Table 1 presents the sample selection and statistics on the industry and
year distributions of the sample firms.
As reported in Panel A of Table 1, we commence our sample formation with 66,824 acquisition announcements over the sample
period. As the bidding firms appear multiple times in a year in the SDC Platinum dataset, we sum the total number of acquisitions
announced and the deal value of all acquisition announcements made by a firm in a fiscal year. Once we merge the deal value and
number of acquisitions by year and firm, the process leaves 29,781 firm-year observations. Finally, the sample is further reduced by
18,454 firm-year observations when merging with accounting data, sourced from the COMPUSTAT database, to construct our tax
measures and control variables. Therefore, the final sample comprises 11,327 firm-year observations when CASH ETR, and CASH
ETRLT are used as measures of tax avoidance, respectively.
Panel B of Table 1 reports the sample distribution based on the 48 Industry Classifications of Fama and French (1997). To
conserve space, we report the top ten industries. The majority of firms in our analysis in full sample group represents Business service
(9.92%), Retail (6.80%) and Electronic Equipment (5.46%) sectors. On the other hand, the majority of the bidding firms in our
sample is observed in the Business Service industry (above 11.98%) followed by the Electronic Equipment (above 6.03%) and
Machinery (above 5.05%) sectors in the M&A sample group. The sample firm distribution across industries is fairly even. Never-
theless, we control for the effects of both year and industry in all our regression analyses.
4.2. Descriptive statistics
Table 2 reports descriptive statistics for sample firms used in our main analysis. In Panel A of Table 2, we report the descriptive
statistics for the variables used in the analyses based on the full sample: M&A and non-M&A firm-year observations. The descriptive
statistics are mostly similar to those reported in prior studies (e.g., Dyreng et al., 2010; Wilson, 2009; Rego and Wilson, 2012).
Notably, the mean CASH ETRLT (CASH ETR) is 0.2673 (0.2634), with an interquartile range between 0.3482 (0.3569) to 0.2739
(0.2617). The mean (median) of the other two measures of tax avoidance, i.e., SHELTER and UTB, are 1.0225 (0.9813) and 0.0104
(0.0096), respectively.9 The mean value of our test variable ACQPR indicates that approximately 23.76% of our sample firms have
announced M&A in sample period. The mean value of other two proxies of managerial acquisitiveness is roughly 0.1918 and 1.5213
for ACQNO and ACQVALUE respectively.
In terms of control variables, the descriptive statistics indicate that the mean firm in our sample is moderately leveraged with a
total debt to asset ratio of 0.2087. Approximately 40.19% of the firm-years in our sample have pre-tax income from foreign op-
erations. The average firm in our sample has about 54.27% of its assets in property plant and equipment (PPE) and about 13.42% of
its total assets are intangible assets (INTAN). The mean firm in our sample has a board with 9 directors from whom around 73 are
independent. CEOs and CFOs of sample firms have, on average, around 57 and 51 years old, respectively. On average, 9 and 10% of
the CEOs and CFOs are females, respectively. Approximately 86% of our sample firms are audited by one of Big N auditors, and 65%
9
It should be noted the descriptive statistics for SHELTER are closely similar to those reported in Rego and Wilson (2012) when we similarly
define SHELTER as an indicator variable coded 1 for firm-years in the top quintile of tax shelter prediction scores, and otherwise 0.
6
Table 2
Summary statistics.
Panel A: Descriptive statistics of variables used in the main, robustness and additional analyses
Variable N Mean Median Q1 Q3 Std dev
CASH-ETR 48,139 0.2634 0.2617 0.1483 0.3569 0.1607

CASH-ETRLT 48,139 0.2673 0.2739 0.1814 0.3482 0.1346
ACQPR 48,139 0.2376 0.0000 0.0000 0.0000 0.4256
ACQNO 11,327 0.1918 0.0759 0.0281 0.1920 0.3301
ACQVALUE 11,327 1.5213 1.0000 1.0000 2.0000 0.9499
EBITDA 48,139 0.1843 0.1627 0.1154 0.2276 0.1027
R&D 48,139 0.0231 0.0000 0.0000 0.0243 0.0456
ADV 48,139 0.0090 0.0000 0.0000 0.0056 0.0226
SG&A 48,139 0.2558 0.2055 0.0666 0.3746 0.2374
CAPEX 48,139 0.1234 0.0984 0.0634 0.1568 0.0891
ΔSALES 48,139 0.1362 0.0905 0.0146 0.2023 0.2312
LEV 48,139 0.2087 0.1897 0.0392 0.3277 0.1795
CASH 48,139 0.1379 0.0753 0.0218 0.1998 0.1583
FOREIGN 48,139 0.4019 0.0000 0.0000 1.0000 0.4903
LOSS 48,139 0.7130 1.0000 0.0000 1.0000 0.4524
SIZE 48,139 6.4789 6.4245 5.0126 7.8752 2.1007
INTAN 48,139 0.1342 0.0557 0.0000 0.2095 0.1736
PPE 48,139 0.5427 0.4619 0.2263 0.8033 0.3848
BDSIZE 14,152 9.3385 9.0000 8.0000 11.0000 2.3760
PINDDIR 14,152 0.7257 0.7500 0.6250 0.8571 0.1601
CEODUAL 14,152 0.6758 1.0000 0.0000 1.0000 0.4681
CEOAGE 14,152 56.7934 57.0000 53.0000 61.0000 6.5523
CEOTENURE 14,152 10.9189 8.0000 5.0000 13.0000 25.0964
CEOFEMALE 14,152 0.0892 0.0000 0.0000 0.0000 0.2851
CFOAGE 6966 51.3297 51.0000 47.0000 56.0000 6.3116
CFOTENEURE 6966 3.9187 3.0000 2.0000 6.0000 2.4190
CFOFEMALE 6966 0.0985 0.0000 0.0000 0.0000 0.2980
SHELTER 13,359 1.0225 0.9813 0.0801 1.9226 1.3819
UTB 19,019 0.0104 0.0096 0.0061 0.0139 0.0072
GAAP-ETR 48,139 0.3126 0.3379 0.2582 0.3800 0.1168
GAAP-ETRLT 48,139 0.3089 0.3305 0.2576 0.3737 0.1097
BIGN 21,528 0.8547 1.0000 1.0000 1.0000 0.3525
SPEC 11,327 0.6522 0.0000 1.0000 1.0000 0.5549
HYPEDSTOCK 21,528 0.3843 0.0000 0.0000 1.0000 0.4864
LAQDQ 21,528 0.6865 0.7217 0.5956 0.7723 0.1144
LAGLNFSIZE 21,528 13.9395 13.8767 12.6719 14.7722 1.5019
LAGDIFFMAF 21,528 −0.0154 0.0000 0.0000 0.0000 0.1156
EQUITINC 7589 0.2626 0.1773 0.0000 0.4876 0.2941
OVERCON 5912 0.4183 0.0000 0.0000 1.0000 0.4933
TOBINQ 10,172 1.9722 1.6388 1.2633 2.2858 1.1112
FIRMAGE 10,172 24.4639 19.0000 11.0000 37.0000 15.9780
STDRET 10,172 0.1042 0.0920 0.0651 0.1285 0.0543
INSTHLDG 10,172 0.4441 0.5112 0.0000 0.7419 0.3453
Panel B: Two sample comparison of tax avoidance between low and high acquisitiveness
Low Acquisitiveness High Acquisitiveness Diff. t-statistic
ACQPR = 0 (n = 36,699) ACQPR =1 (n = 11,440)
CASH-ETR 0.2660 0.2550 −0.0110 (−7.16)⁎⁎⁎
CASH-ETRLT 0.2702 0.2581 −0.0121 (−9.30)⁎⁎⁎
Low ACQNO (n = 8047) High ACQNO (n = 3280)
CASH-ETR 0.2604 0.2396 −0.0208 (−7.65)⁎⁎⁎
CASH-ETRLT 0.2632 0.2433 −0.0199 (−8.44)⁎⁎⁎
Low ACQVALUE (n = 5959) High ACQVALUE (n = 5368)
CASH-ETR 0.2582 0.2502 −0.0080 (−3.16)⁎⁎⁎
CASH-ETRLT 0.2595 0.2551 −0.0044 (−2.00)⁎⁎
This table presents the summary statistics. Panel A reports the descriptive statistics for the variables used in the main, robustness and additional
analyses. Panel B reports the two sample comparison of tax avoidance between low managerial acquisitiveness versus high managerial acquisi-
tiveness. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels, respectively. See Appendix 1 for
the variable definitions.
of the bidding firms use city-level industry specialized audit firms. Looking next at the firm level disclosure quality, the median values
of firms' disaggregated financial information and the natural logarithm of file size in the year prior to acquisition are around 0.7217
and 13.88, respectively.
In Panel B of Table 2, we report the descriptive statistics for the tax measures divided into high acquisitive versus low acquisitive
groups for the sample. Both measures of tax avoidance consistently show evidence that M&A firms pay less tax than non-M&A firms in
7
both short run and long run estimation periods. More importantly, the cash effective tax rate persistently show that M&A firms pay a
lower effective tax rate at a larger extent than non-M&A firms. The statistics implies that firm's tax incentive is a major driver of
acquisition decision in order to reap windfall gains via tax reductions (Auerbach and Reishus, 1987). The M&A firms pay approxi-
mately 1.5 percentage lower tax rate than non M&A firms and this difference is statistically significant at 1% level. Using M&A
sample, we also find similar but stronger evidence that high acquisitive firms (using number of acquisitions announced in a year) pay
24.33% effective tax rate compared to 26.32% effective tax rate paid by low acquisitive firms in long-run tax measures.
The correlation matrix of the variables (un-tabulated) reveals that the Spearman correlation between CASH ETRLT (CASH ETR)
and ACQPR is −0.0440 (−0.0194) and that between CASH ETRLT (CASH ETR) and ACQNO is −0.0472 (−0.0419); these results are
in line with our expectations. We observe qualitatively similar correlations between CASH ETRLT (CASH ETR) measures and the
ACQVALUE of managerial acquisitiveness. Although several of our independent variables are significantly correlated, the highest
variance inflation factor (VIF) of 3.01 pertaining to PPE is noticeably less than the threshold of 10, ruling out the possibility that our
regression results are vulnerable to multicollinearity problems among the independent variables (Kennedy, 2008).
5. Empirical results
5.1. Managerial acquisitiveness and tax avoidance (H1)
5.1.1. Cross-sectional regression analysis

We first estimate the Eq. 1 to test the first hypothesis in which our main measures of tax avoidance (CASH_ETR and CASH_ETRLT)
are regressed on managerial acquisitiveness (ACQ) and the control variables. The results based on three proxies of ACQ (ACQPR,
ACQNO and ACQVALUE) are reported in Panel A of Table 3.
The results indicate that the coefficients on ACQPR (−0.0108, −0.0153) are negative and statistically significant at the 1% level
based on CASH ETR and CASH ETRLT, suggesting that firms that undertake M&A are associated with higher tax avoidance. The results
also indicate that the coefficients on ACQNO (−0.0082, −0.0084) and ACQVALUE (−0.0214, −0.0139) are similarly negative and
statistically significant at the 1% level, proposing that managers who undertake frequent and large dollar value M&A decisions are
associated with higher tax avoidance.10 In line with our first hypothesis, these results show strong evidence that high acquisitive firms
engage in tax avoidance at higher rate during M&A announcement periods compared to their counterpart low acquisitive firms. In
terms of economic significance, these results show that the average decrease in cash effective tax rates in both short term and long
term is around 1% following the movement from ACQPR = 0 to ACQPR = 1 or an increase of one unit in ACQNO or ACQVALUE.
A number of prior studies (e.g., Minnick and Noga, 2010; Lanis and Richardson, 2011) document that corporate governance plays
an important role in tax management. Therefore, we control for several board characteristics in our main models to examine the
robustness of our main findings. More specifically, consistent with Minnick and Noga (2010), we control for board size (BDSIZE),
board independence (PINDDIR), and whether CEO is also the chairman of the board (CEODUAL). Hermalin and Weisbach (1988)
suggest that more experienced CEOs exert significant power to influence the board composition and the board monitoring of financial
wrongdoing. Markov and Tamayo (2006) show that analysts learn by doing consistent with relational learning with irrationality.
Similarly, experienced CEOs may also act in their own self-interest by engaging in fraudulent activities (Mace, 1986). Furthermore,
Huang and Kisgen (2013) show that male executives are more overconfident than female executives, as they undertake more ac-
quisitions, issue debt more often, and are less likely to exercise stock options early. Therefore, we also control for CEO age (CEOAGE),
CEO tenure (CEOTENURE), and whether the CEO is a female (CEOFEMALE) and report the results in in Panel B of Table 3. The results
continue to show negative and statistically significant coefficients on our managerial acquisitiveness, reinforcing our findings in
Panel A of Table 3.
We further re-estimate our regression analysis after controlling for CFO age (CEOAGE), CFO tenure (CEOTENURE), and the gender
of CFO (CFOFEMALE). The results, reported in Appendix 2, show that our findings on the association between firm acquisitiveness
and tax avoidance remain unchanged even though the sample size significantly reduces. The results for the gender of CFOs and,
somehow for CEOs, are relatively consistent with Francis et al. (2014) who find that female CFOs are less tax aggressive.
In addition, we investigate the pre-acquisition stock hyping in our main models. Lang and Lundholm (2000) suggest that firms
might use earnings forecasts to window-dress and hype their stock price and then issue new capital at a lower cost. In our context,
opportunistic managers of the bidding firms may opt to disclose more information in pre-acquisition period to hype stock price and it
is likely that such managers may also keep in tone in tax avoidance. Therefore, we control for high stock price performance in pre-
acquisition period relative to the industry stock price performance. We define a dummy variable (HYPEDSTOCK) and code it as one if
a stock return is above the annual industry median of stock return in the pre-acquisition year and zero otherwise. We include
HYPEDSTOCK and its interaction with our acquisitiveness measures in regression analysis to examine the potential moderating effect
of stock hyping.
In a recent study, Chen and Lin (2017) provide evidence that information asymmetry significantly affects the tax avoidance
decisions. Therefore, we include a number of variables that have been shown in prior research to be the determinants of a firm's
information environment. Following Klassen et al. (2015), we control for Big N auditor (BIGN) to capture the impact of audit quality
and also the disaggregation quality of accounting data (LAGDQ) to control for disclosure quality of annual reports (Chen et al., 2015).
Furthermore, we control for the length of 10-K disclosure (LAGLNFSIZE) as a proxy for annual report readability to identify the effect
10
The use of 10 year rolling measures of Book ETR and Cash ETR as dependent variables yield consistent results.
8
Table 3
Managerial acquisitiveness and tax avoidance.
Panel A: The association between managerial acquisitiveness and corporate tax avoidance
ACQPR ACQNO ACQVALUE
Variable CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT
Intercept 0.2644 ⁎⁎⁎

0.2680 ⁎⁎⁎
0.2611 ⁎⁎⁎
0.2581 ⁎⁎⁎
0.2661 ⁎⁎⁎
0.2608⁎⁎⁎
(12.82) (13.91) (9.38) (10.84) (9.48) (10.80)
ACQ −0.0108⁎⁎⁎ −0.0153⁎⁎⁎ −0.0082⁎⁎⁎ −0.0084⁎⁎⁎ −0.0214⁎⁎⁎ −0.0139⁎⁎⁎
(−5.46) (−8.23) (−5.69) (−6.48) (−5.21) (−4.03)
EBITDA 0.0444⁎⁎⁎ 0.0148 0.1126⁎⁎⁎ 0.0806⁎⁎⁎ 0.1097⁎⁎⁎ 0.0780⁎⁎⁎
(3.27) (1.07) (6.43) (4.83) (6.28) (4.68)
R&D −0.4564⁎⁎⁎ −0.4481⁎⁎⁎ −0.4680⁎⁎⁎ −0.4603⁎⁎⁎ −0.4685⁎⁎⁎ −0.4620⁎⁎⁎
(−14.79) (−14.03) (−11.59) (−11.69) (−11.60) (−11.74)
ADV −0.0838 −0.0900⁎ −0.1961⁎⁎⁎ −0.1368⁎ −0.2053⁎⁎⁎ −0.1443⁎
(−1.57) (−1.65) (2.59) (−1.75) (−2.70) (−1.83)
SG&A 0.0648⁎⁎⁎ 0.0713⁎⁎⁎ 0.0495⁎⁎⁎ 0.0512⁎⁎⁎ 0.0493⁎⁎⁎ 0.0509⁎⁎⁎
(9.57) (10.25) (5.07) (5.26) (5.03) (5.20)
CAPEX −0.0291⁎⁎ −0.1148⁎⁎⁎ −0.0518⁎⁎⁎ −0.1082⁎⁎⁎ −0.0651⁎⁎⁎ −0.1183⁎⁎⁎
(−2.38) (−9.68) (−2.85) (−6.54) (−3.55) (−7.10)
ΔSALES −0.0970⁎⁎⁎ −0.0532⁎⁎⁎ −0.0892⁎⁎⁎ −0.0565⁎⁎⁎ −0.0857⁎⁎⁎ −0.0553⁎⁎⁎
(−22.22) (−13.56) (−14.18) (−9.98) (−13.33) (−9.47)
LEV −0.0941⁎⁎⁎ −0.0881⁎⁎⁎ −0.1050⁎⁎⁎ −0.0979⁎⁎⁎ −0.0996⁎⁎⁎ −0.0948⁎⁎⁎
(−11.52) (−10.70) (−9.84) (−9.43) (−9.20) (−9.01)
CASH −0.0335⁎⁎⁎ −0.0307⁎⁎⁎ −0.0411⁎⁎⁎ −0.0366⁎⁎⁎ −0.0403⁎⁎⁎ −0.0357⁎⁎⁎
(−3.61) (−3.23) (−3.04) (−2.73) (−2.98) (−2.66)
FOREIGN 0.0021 0.0101⁎⁎⁎ 0.0020 0.0101⁎⁎⁎ 0.0020 0.0102⁎⁎⁎
(0.75) (3.47) (0.56) (2.78) (0.54) (2.79)
LOSS 0.0157⁎⁎⁎ 0.0182⁎⁎⁎ 0.0170⁎⁎⁎ 0.0210⁎⁎⁎ 0.0168⁎⁎⁎ 0.0210⁎⁎⁎
(6.45) (7.30) (4.97) (6.35) (4.90) (6.32)
SIZE 0.0023⁎⁎⁎ 0.0016⁎ −0.0010 −0.0004 −0.0026⁎⁎ −0.0019⁎
(2.66) (1.69) (−0.91) (−0.40) (−2.32) (−1.73)
INTAN −0.0033 −0.0063 0.0389⁎⁎⁎ 0.0272⁎⁎ 0.0388⁎⁎⁎ 0.0264⁎⁎
(−0.37) (−0.68) (3.23) (2.29) (3.20) (2.21)
PPE −0.0273⁎⁎⁎ −0.0266⁎⁎⁎ −0.0319⁎⁎⁎ −0.0313⁎⁎⁎ −0.0319⁎⁎⁎ −0.0308⁎⁎⁎
(−4.57 (−4.40) (−4.16) (4.10) (−4.15) (−4.02)
Year and Industry FE Yes Yes Yes Yes Yes Yes
Cluster by firm Yes Yes Yes Yes Yes Yes
N 48,139 48,139 11,327 11,327 11,327 11,327
Adj. R2 0.0959 0.1463 0.1680 0.2138 0.1603 0.2109
Panel B: The association between managerial acquisitiveness and corporate tax avoidance controlling for board characteristics
Variable ACQPR ACQNO ACQVALUE
CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT
Intercept 0.3062⁎⁎⁎ 0.2995⁎⁎⁎ 0.2737⁎⁎⁎ 0.2561⁎⁎⁎ 0.2833⁎⁎⁎ 0.2350⁎⁎⁎

(7.41) (8.19) (8.28) (8.57) (8.58) (5.89)
ACQ −0.0092⁎⁎⁎ −0.0107⁎⁎⁎ −0.0103⁎⁎⁎ −0.0077⁎⁎⁎ −0.0342⁎⁎⁎ −0.0275⁎⁎⁎
(−3.51) (−4.93) (−5.69) (−4.96) (−5.46) (−5.29)
EBITDA 0.0921⁎⁎⁎ 0.1227⁎⁎⁎ 0.1313⁎⁎⁎ 0.1398⁎⁎⁎ 0.1266⁎⁎⁎ 0.1376⁎⁎⁎
(4.95) (6.97) (4.88) (6.16) (4.71) (5.94)
R&D −0.4520⁎⁎⁎ −0.4555⁎⁎⁎ −0.4453⁎⁎⁎ −0.5255⁎⁎⁎ −0.4581⁎⁎⁎ −0.4755⁎⁎⁎
(−8.68) (−9.12) (−7.48) (−10.36) (−7.64) (−8.51)
ADV −0.1853** −0.1451⁎⁎ −0.2922⁎⁎⁎ −0.1219 −0.2928⁎⁎⁎ −0.1336
(−2.53) (−2.01) (−3.05) (−1.30) (−3.06) (−1.26)
SG&A 0.0539⁎⁎⁎ 0.0430⁎⁎⁎ 0.0512⁎⁎⁎ 0.0517⁎⁎⁎ 0.0500⁎⁎⁎ 0.0392⁎⁎⁎
(4.61) (3.74) (3.59) (4.04) (3.49) (2.66)
CAPEX −0.1376⁎⁎⁎ −0.1999⁎⁎⁎ −0.0969⁎⁎⁎ −0.1518⁎⁎⁎ −0.1173⁎⁎⁎ −0.1552⁎⁎⁎
(−5.79) (−9.34) (−2.93) (−5.37) (−3.51) (−5.52)
ΔSALES −0.0848⁎⁎⁎ −0.0508⁎⁎⁎ −0.0904⁎⁎⁎ −0.0628⁎⁎⁎ −0.0859⁎⁎⁎ −0.0590⁎⁎⁎
(−9.93) (−8.24) (−7.87) (−7.17) (−7.49) (−6.61)
LEV −0.0718⁎⁎⁎ −0.0765⁎⁎⁎ −0.0804⁎⁎⁎ −0.0818⁎⁎⁎ −0.0729⁎⁎⁎ −0.0832⁎⁎⁎
(−5.90) (−6.51) (−5.07) (−5.54) (−4.55) (−5.72)
CASH −0.0372⁎⁎ −0.0408⁎⁎⁎ −0.0563⁎⁎⁎ −0.0530⁎⁎⁎ −0.0558⁎⁎⁎ −0.0428⁎⁎
(−2.41) (−2.83) (−2.66) (−2.82) (−2.64) (−2.26)
FOREIGN −0.0019 0.0026 0.0006 0.0010 −0.0008 0.0051
(−0.49) (0.67) (0.10) (0.19) (−0.14) (0.97)
(continued on next page)
9
Table 3 (continued)
Panel B: The association between managerial acquisitiveness and corporate tax avoidance controlling for board characteristics
Variable ACQPR ACQNO ACQVALUE
LOSS −0.0002 0.0009 0.0069 0.0061 0.0072 0.0067

(−0.05) (0.26) (1.51) (1.38) (1.57) (1.49)
SIZE −0.0090⁎⁎⁎ −0.0094⁎⁎⁎ −0.0058⁎⁎⁎ −0.0063⁎⁎⁎ −0.0079⁎⁎⁎ −0.0080⁎⁎⁎
(−5.34) (−5.51) (−2.86) (−3.22) (−3.87) (−3.94)
INTAN −0.0057 0.0110 0.0070 0.0041 0.0059 0.0178
(−0.43) (0.83) (0.42) (0.27) (0.35) (1.12)
PPE −0.0342⁎⁎⁎ −0.0398⁎⁎⁎ −0.0385⁎⁎⁎ −0.0405⁎⁎⁎ −0.0379⁎⁎⁎ −0.0412⁎⁎⁎
(−4.07) (−4.64) (−3.82) (−4.36) (−3.75) (−3.98)
BDSIZE 0.0025⁎⁎⁎ 0.0031⁎⁎⁎ 0.0042⁎⁎⁎ 0.0042⁎⁎⁎ 0.0043⁎⁎⁎ 0.0039⁎⁎⁎
(3.07) (3.76) (4.25) (4.39) (4.28) (4.03)
PINDDIR −0.0034 −0.0017 −0.0010 0.0078 −0.0010 0.0101
(−0.31) (−0.15) (−0.07) (0.54) (−0.07) (0.71)
CEODUAL −0.0019 −0.0010 0.0047 0.0043 0.0047 0.0039
(−0.54) (−0.31) (0.93) (0.92) (0.92) (0.85)
CEOAGE 0.0007⁎⁎⁎ 0.0006⁎⁎ 0.0004 0.0005 0.0005 0.0004
(2.75) (2.54) (1.18) (1.28) (1.20) (1.17)
CEOTENURE 0.0000 0.0000 0.0000 −0.0001 0.0000 0.0000
(−0.60) (−0.22) (0.09) (−0.23) (−0.01) (0.05)
CEOFEMALE 0.0137⁎⁎⁎ 0.0019 0.0169⁎⁎⁎ 0.0177⁎⁎⁎ 0.0171⁎⁎⁎ 0.0171⁎⁎⁎
(2.68) (0.39) (2.82) (3.27) (2.83) (3.14)
N 14,152 14,180 4520 4520 4520 4520
Adj. R2 0.1220 0.1909 0.1470 0.2141 0.1448 0.2286
This table presents the regression results of the tax avoidance (CASH ETR, and CASH ETRLT) on acquisitiveness (ACQPR, ACQNO & ACQVALUE) and
control variables. All model specifications employ robust standard errors with one-way clustered t-statistics, which are reported in the parentheses
below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels, respectively. See
Appendix 1 for the variable definitions.
of information reporting complexity (Loughran and McDonald, 2014). Finally, we control for the management earnings forecasts in
pre-acquisition period which are voluntary in nature (Baik et al., 2011; Kwak et al., 2012). Specifically, we include an indicator
variable (LAGDIFFMAF) in our regression models and code it one if a firm's earnings forecasts are higher than the actual earnings in
the last two quarters prior to acquisitions and zero otherwise.
The results, reported in Table 4, show that the association between acquisitiveness and tax avoidance is still significant and
negative at the 1% level even we control for hyped stock and other common determinants of information environment in our analysis.
Specifically, we observe the coefficients on interaction term between acquisitiveness and hyped stock (ACQ*HYPEDSTOCK) to be
negative and significant at the 10% level or above, suggesting that the negative association between acquisitiveness and tax
avoidance is more pronounced when a manager is involved in stock hyping in the year prior to acquisition announcement. The results
for the other determinants of information environment are mostly consistent with the expectations that audit quality and quality of
annual reports reduce tax avoidance but complexity of annual reports exacerbates tax avoidance.
5.2. Endogeneity test
5.2.1. Propensity score matching analysis

A potential endogeneity concern in our estimation is that our empirical models may suffer from selection issue based on ob-
servable firm characteristics. To address this concern, we re-estimate our main analysis using a sample firms with high managerial
acquisitiveness and their propensity-score-matched control firms with low managerial acquisitiveness. To obtain the control sample,
in each year over our sample period we run a probit regression where the dependent variable is an indicator variable representing
whether a firm manager is high or low acquisitive, and the explanatory variables include all the independent variables from Eq. 1 plus
a number of other variables which have been shown to be associated managerial acquisitiveness (e.g., Levi et al., 2014; Chhaochharia
et al., 2012).11 These variables include percentage of institutional shareholding (INSTO), number of analysts following (ANALYSTS),
firm age (FIRMAGE), board size (BDSIZE), percentage of independent directors (PINDDIR) and CEO-chairman indicator (CEODUAL).
For each sample firm with high acquisitive manager, we choose one control firm with low acquisitive manager that has the closest
propensity of having high acquisitive manager based on a caliper width of 0.01. The results of re-estimating the main analysis in Eq. 1
11
The dependent variable in the probit regression is ACQPR when ACQPR is our measure of managerial acquisitiveness. In the case that man-
agerial acquisitiveness is measured by ACQNO and ACQVALUE, the dependent variable is the converted ACQNO and ACQVALUE into a dummy
variable and coded 1 (0) when they are above (below) their industry-year median, respectively.
10
Table 4
Managerial acquisitiveness and tax avoidance: pre-acquisition information environment.
Intercept 0.1930⁎⁎⁎ 0.2632⁎⁎⁎ 0.1866⁎⁎⁎ 0.2843⁎⁎⁎ 0.2016⁎⁎⁎ 0.2951⁎⁎⁎

(4.92) (7.55) (3.28) (5.38) (3.55) (5.59)
ACQ −0.0155⁎⁎⁎ −0.0158⁎⁎⁎ −0.0065⁎⁎⁎ −0.0050⁎⁎⁎ −0.0190⁎⁎⁎ −0.0107⁎
(−5.45) (−6.66) (−2.99) (−2.93) (−2.69) (−1.80)
HYPEDSTOCK −0.0071⁎⁎⁎ −0.0060⁎⁎⁎ −0.0007 −0.0001 −0.0115⁎⁎⁎ −0.0404⁎⁎⁎
(−3.15) (−3.33) (−0.19) (−0.03) (−2.62) (−2.78)
ACQ*HYPEDSTOCK −0.0070⁎⁎ −0.0054⁎ −0.0141⁎⁎ −0.0091⁎ −0.0294⁎ −0.0039⁎
(−1.96) (−1.85) (−1.97) (−1.90) (−1.79) (−1.91)
EBITDA 0.1197⁎⁎⁎ 0.1046⁎⁎⁎ 0.1473⁎⁎⁎ 0.1477⁎⁎⁎ 0.1457⁎⁎⁎ 0.1467⁎⁎⁎
(7.03) (6.34) (5.28) (6.34) (5.26) (6.37)
R&D −0.4553⁎⁎⁎ −0.4499⁎⁎⁎ −0.4474⁎⁎⁎ −0.4792⁎⁎⁎ −0.4498⁎⁎⁎ −0.4809⁎⁎⁎
(−10.32) (−10.19) (−7.33) (−7.68) (−7.31) (−7.69)
ADV −0.1745⁎⁎⁎ −0.1457⁎⁎ −0.1853 −0.1548 −0.1894⁎ −0.1575
(−2.81) (−2.20) (−1.62) (−1.40) (−1.66) (−1.42)
SG&A 0.0559⁎⁎⁎ 0.0555⁎⁎⁎ 0.0503⁎⁎⁎ 0.0477⁎⁎⁎ 0.0491⁎⁎⁎ 0.0466⁎⁎⁎
(5.87) (5.98) (3.18) (3.12) (3.10) (3.05)
CAPEX −0.1111⁎⁎⁎ −0.1717⁎⁎⁎ −0.0765⁎⁎ −0.1688⁎⁎⁎ −0.0896⁎⁎⁎ −0.1782⁎⁎⁎
(−6.15) (−10.36) (−2.47) (−6.39) (−2.88) (−6.74)
ΔSALES −0.0907⁎⁎⁎ −0.0535⁎⁎⁎ −0.0916⁎⁎⁎ −0.0607⁎⁎⁎ −0.0867⁎⁎⁎ −0.0566⁎⁎⁎
(−14.02) (−10.32) (−8.66) (−7.13) (−8.16) (−6.63)
LEV −0.0809⁎⁎⁎ −0.0827⁎⁎⁎ −0.1107⁎⁎⁎ −0.1093⁎⁎⁎ −0.1037⁎⁎⁎ −0.1039⁎⁎⁎
(−7.33) (−7.50) (−6.94) (−7.36) (−6.46) (−6.95)
CASH −0.0703⁎⁎⁎ −0.0616⁎⁎⁎ −0.0820⁎⁎⁎ −0.0583⁎⁎⁎ −0.0806⁎⁎⁎ −0.0573⁎⁎⁎
(−5.36) (−4.79) (−3.81) (−2.96) (−3.74) (−2.92)
FOREIGN 0.0031 0.0097⁎⁎⁎ 0.0118⁎⁎ 0.0097⁎ 0.0117⁎⁎ 0.0097⁎
(0.93) (2.83) (2.30) (1.91) (2.26) (1.90)
LOSS 0.0058⁎⁎ 0.0104⁎⁎⁎ 0.0069 0.0104⁎⁎ 0.0071 0.0105⁎⁎
(1.97) (3.65) (1.56) (2.41) (1.61) (2.44)
SIZE −0.0044⁎⁎⁎ −0.0053⁎⁎⁎ −0.0027 −0.0029⁎ −0.0041⁎⁎ −0.0039⁎⁎
(−3.72) (−4.36) (−1.57) (−1.75) (−2.43) (−2.46)
INTAN −0.0267⁎⁎ −0.0161 0.0220 0.0304⁎ 0.0231 0.0312⁎
(−2.26) (−1.36) (1.27) (1.88) (1.32) (1.92)
PPE −0.0463⁎⁎⁎ −0.0431⁎⁎⁎ −0.0268⁎⁎ −0.0300⁎⁎⁎ −0.0276⁎⁎ −0.0305⁎⁎⁎
(−6.53) (−6.17) (−2.37) (−2.74) (−2.45) (−2.80)
BIGN 0.0092⁎⁎ 0.0095⁎⁎ 0.0179⁎⁎ 0.0178⁎⁎ 0.0180⁎⁎ 0.0177⁎⁎
(2.04) (2.06) (2.11) (2.04) (2.14) (2.04)
LAGDQ 0.1492⁎⁎⁎ 0.1080⁎⁎⁎ 0.1434⁎⁎⁎ 0.0891⁎⁎ 0.1421⁎⁎⁎ 0.0884⁎⁎
(5.30) (3.92) (3.11) (2.10) (3.08) (2.09)
LAGLNFSIZE −0.0001 −0.0031⁎⁎ −0.0038⁎ −0.0062⁎⁎⁎ −0.0044⁎ −0.0067⁎⁎⁎
(−0.09) (−2.02) (−1.68) (−3.24) (−1.94) (−3.48)
LAGDIFFMAF −0.0288⁎⁎⁎ −0.0204⁎⁎⁎ −0.0059 0.0028 −0.0071 0.0019
(−3.59) (−2.89) (−0.42) (0.22) (−0.49) (0.15)
Year FE and Industry FE Yes Yes Yes Yes Yes Yes
N 21,528 21,528 4712 4712 4712 4712
Adj. R2 0.1366 0.1946 0.1866 0.2666 0.1871 0.2676
This table presents the regression results of the tax avoidance measures (CASH ETR and CASH ETRLT) on acquisitiveness variables (ACQPR, ACQNO
& ACQVALUE) interacting with hyped stock and a number of pre-acquisition disclosure quality and tax control variables. All model specifications
employ robust standard errors with one-way clustered t-statistics, which are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎,
⁎⁎
, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
using this propensity score matched sample, reported in Table 5, continue to show a negative and significant association between all
three measures of managerial acquisitiveness and tax avoidance and this finding is robust to selection issue based on observable firm
characteristics.
5.2.2. Heckman test

Following a numerous prior studies (e.g., Leuz and Verrecchia 2000; Chaney et al. 2004; McGuire, Omer, and Wang 2012), we use
the Heckman's (1979) two-stage model to control for self-selection bias. For our study, the possibility becomes exacerbated by the
focus on that CEOs who make aggressive tax avoidance are more likely to engage in M&A decisions or undertake frequent and make
large dollar value acquisitions. In particular, we want to understand why some firms engage managers with distinct characteristics
compared to other firms to implement aggressive managerial decisions (such as acquisitions and tax avoidance). In the first stage, we
use excessive acquisitiveness (EXCSSACQ) as an instrumental variable, consistent with Hardin et al. (2003), and estimate the probit
regression using our proxies for managerial acquisitiveness (in dummy format) on all the control variables used in Eq. 1 plus a
11
Table 5
Managerial acquisitiveness and tax avoidance: propensity score matching.
Intercept 0.2630⁎⁎⁎ 0.2438⁎⁎⁎ 0.2051⁎⁎⁎ 0.2646⁎⁎⁎ 0.2501⁎⁎⁎ 0.2470⁎⁎⁎

(9.04) (9.86) (9.13) (9.64) (8.51) (9.22)
ACQ −0.0115⁎⁎⁎ −0.0156⁎⁎⁎ −0.0136⁎⁎⁎ −0.0134⁎⁎⁎ −0.0084⁎⁎⁎ −0.0067⁎⁎⁎
(−4.99) (−7.40) (−4.08) (−4.82) (−3.00) (−2.88)
EBITDA 0.0451⁎⁎⁎ 0.0273⁎ 0.1050⁎⁎⁎ 0.0780⁎⁎⁎ 0.1238⁎⁎⁎ 0.0771⁎⁎⁎
(2.99) (1.88) (4.64) (3.83) (6.00) (4.02)
R&D −0.4441⁎⁎⁎ −0.4493⁎⁎⁎ −0.4687⁎⁎⁎ −0.4639⁎⁎⁎ −0.4741⁎⁎⁎ −0.4697⁎⁎⁎
(−12.52) (−12.72) (−9.56) (−10.39) (−10.41) (−11.10)
ADV −0.2168⁎⁎⁎ −0.1662⁎⁎⁎ −0.1663⁎ −0.1666⁎ −0.2302⁎⁎⁎ −0.1629⁎
(−3.52) (−2.73) (−1.67) (−1.65) (−2.62) (−1.88)
SG&A 0.0668⁎⁎⁎ 0.0703⁎⁎⁎ 0.0417⁎⁎⁎ 0.0434⁎⁎⁎ 0.0479⁎⁎⁎ 0.0494⁎⁎⁎
(8.26) (8.81) (3.26) (3.69) (4,28) (4.55)
CAPEX −0.0342⁎⁎ −0.1135⁎⁎⁎ −0.0611⁎⁎ −0.1022⁎⁎⁎ −0.0665⁎⁎⁎ −0.1161⁎⁎⁎
(−2.27) (−8.46) (−2.58) (−4.90) (−3.08) (−6.10)
ΔSALES −0.0885⁎⁎⁎ −0.0567⁎⁎⁎ −0.0899⁎⁎⁎ −0.0601⁎⁎⁎ −0.0934⁎⁎⁎ −0.0562⁎⁎⁎
(−16.66) (−12.10) (−11.22) (−8.28) (−11.03) (−7.53)
LEV −0.0961⁎⁎⁎ −0.0859⁎⁎⁎ −0.1128⁎⁎⁎ −0.1114⁎⁎⁎ −0.1129⁎⁎⁎ −0.1087⁎⁎⁎
(−10.49) (−9.71) (−8.36) (−8.93) (−8.90) (−9.30)
CASH −0.0451⁎⁎⁎ −0.0372⁎⁎⁎ −0.0521⁎⁎⁎ −0.0506⁎⁎⁎ −0.0363⁎⁎ −0.0163
(−3.93) (−3.31) (−2.92) (−2.88) (−2.33) (−1.07)
FOREIGN −0.0051 0.0017 0.0065 0.0119⁎⁎⁎ 0.0005 0.0087⁎⁎
(−1.55) (0.50) (1.39) (2.68) (0.13) (2.17)
LOSS 0.0144⁎⁎⁎ 0.0188⁎⁎⁎ 0.0174⁎⁎⁎ 0.0205⁎⁎⁎ 0.0177⁎⁎⁎ 0.0230⁎⁎⁎
(4.79) (6.47) (4.05) (5.16) (4.51) (6.08)
SIZE 0.0021⁎ 0.0030⁎⁎⁎ −0.0026⁎ −0.0017 −0.0021⁎ −0.0010
(1.90) (2.63) (−1.78) (−1.21) (−1.63) (−0.86)
INTAN 0.0182⁎ 0.0109 0.0387⁎⁎⁎ 0.0264⁎ 0.0393⁎⁎⁎ 0.0285⁎⁎
(1.76) (1.06) (2.60) (1.90) (2.79) (2.16)
PPE −0.0249⁎⁎⁎ −0.0239⁎⁎⁎ −0.0260⁎⁎⁎ −0.0294⁎⁎⁎ −0.0349⁎⁎⁎ −0.0310⁎⁎⁎
(−3.77) (−3.58) (−2.59) (−3.10) (−4.05) (−3.65)
N 21,420 21,420 5940 5940 7888 7888
Adj. R2 0.1178 0.1758 0.1741 0.2438 0.1689 0.2233
This table presents the propensity score matching results of the tax avoidance (CASH ETR, and CASH ETRLT) on acquisitiveness (ACQPR, ACQNO &
ACQVALUE) and control variables. All model specifications employ robust standard errors with one-way clustered t-statistics, which are reported in
the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels,
respectively. See Appendix 1 for the variable definitions.
number of other variables shown in prior studies (e.g., Chhaochharia et al., 2012; Levi et al., 2014) to be the determinants of
managerial acquisitiveness. These variables are firm age (FIRMAGE), board size (BDSIZE), percentage of independent directors (%
INDIR), CEO duality (DUALITY), institutional shareholding (INSTHLDG), and number of analysts following (ANALYSTS). In the
second stage, we calculate an inverse Mills ratio (INVMILLS) based on the estimated coefficients from the first stage and include it as
an independent variable in Eq. 1. The inverse Mills ratio controls for the effect of the observable and unobservable determinants of
firm's decision in acquisitions on the association between managerial acquisitiveness and different dimension of corporate tax
avoidance. The results of this test are reported in Table 6.
The results of our estimation of Eq. 1 after including INVMILLS continue to show negative and significant coefficients on ACQ
measures at the 1% level. These results reinforce our earlier evidence documented in Table 3, ruling out the possibility that our main
findings are subject to self-selection bias. The un-tabulated VIFs of the correlation between ACQ measures and INVMILL are lower
than 10 confirming that the multicollinearity is not high in the selection model.
5.3. Managerial acquisitiveness and tax avoidance (H2)
The results thus far show high acquisitive firms engage in higher level of tax avoidance. However, our analyses do not clarify
efficiency or opportunistic-based managerial motives drive the results.
Firm efficiency theory suggests that managers engage in acquisitions to improve the firm performance and to create synergies for
firm which will improve the firm value. On the other hand, the M&A present the managers with opportunity that can exacerbate the
potential for conflicts of interest between managers and shareholders. Managers who engage in M&As have high incentive to improve
their compensation and future career prospect even acquisitions do not create value for shareholders. One of the issue in our analysis
is that managerial acquisitiveness can proxy for firm efficiency or managerial tendency to agency issue or behavioral trait. Therefore,
we attempt to distinguish whether efficiency or opportunistic motives or behavioral motive of corporate acquisitions exacerbated the
12
Table 6
Endogeneity tests: Heckman Test.
Variable First Stage Second stage First Stage Second stage
Intercept −2.4622 ⁎⁎⁎

0.2371 ⁎⁎⁎
0.2494 ⁎⁎⁎
−2.3660 ⁎⁎⁎
0.2935⁎⁎⁎
0.3006⁎⁎⁎
0.3011 ⁎⁎⁎
0.3058⁎⁎⁎
(125.69) (3.10) (3.48) (33.41) (3.27) (3.65) (3.33) (3.70)
EXCSSACQ 0.2011⁎⁎⁎ 0.1605⁎⁎⁎
(22.14) (11.72)
ACQ −0.0091⁎⁎⁎ −0.0112⁎⁎⁎ −0.0069⁎⁎⁎ −0.0058⁎⁎⁎ −0.0191⁎⁎⁎ −0.0135⁎⁎⁎
(−3.73) (−5.57) (−3.92) (−4.07) (−3.19) (−2.78)
INV_RATIO 0.0246 0.0153 −0.0006 −0.0034 −0.0010 −0.0036
(0.98) (0.63) (−0.02) (−0.12) (−0.03) (−0.13)
EBITDA 0.8048⁎⁎⁎ 0.1295⁎⁎⁎ 0.1566⁎⁎⁎ 0.0313 0.1212⁎⁎⁎ 0.1290⁎⁎⁎ 0.1185⁎⁎⁎ 0.1268⁎⁎⁎
(30.67) (5.59) (7.07) (0.02) (4.69) (5.63) (4.59) (5.55)
R&D 1.8245⁎⁎⁎ −0.3992⁎⁎⁎ −0.4122⁎⁎⁎ 0.7362 −0.4271⁎⁎⁎ −0.4552⁎⁎⁎ −0.4338⁎⁎⁎ −0.4613⁎⁎⁎
(28.31) (−7.22) (−7.80) (1.92) (−6.90) (−8.1) (−6.97) (−8.17)
ADV −0.7360 −0.2397⁎⁎⁎ −0.2155⁎⁎⁎ −0.2324 −0.3054⁎⁎⁎ −0.2171⁎⁎ −0.3117⁎⁎⁎ −0.2220⁎⁎
(1.87) (−3.46) (−3.14) (0.06) (−3.05) (−2.20) (−3.12) (−2.25)
SG&0041 −0.0281 0.0490⁎⁎⁎ 0.0393⁎⁎⁎ 0.2552⁎ 0.0561⁎⁎⁎ 0.0477⁎⁎⁎ 0.0551⁎⁎⁎ 0.0470⁎⁎⁎
(0.12) (4.60) (3.65) (3.18) (3.60) (3.24) (3.51) (3.16)
CAPEX 0.1964 −0.1191⁎⁎⁎ −0.1771⁎⁎⁎ 1.0669⁎⁎⁎ −0.1050⁎⁎⁎ −0.1694⁎⁎⁎ −0.1192⁎⁎⁎ −0.1804⁎⁎⁎
(1.20) (−5.04) (−8.47) (12.85) (−2.86) (−4.98) (−3.23) (−5.29)
ΔSALES 0.4804⁎⁎⁎ −0.0774⁎⁎⁎ −0.0486⁎⁎⁎ 0.3607⁎⁎⁎ −0.0898⁎⁎⁎ −0.0603⁎⁎⁎ −0.0882⁎⁎⁎ −0.0595⁎⁎⁎
(56.29) (−7.49) (−5.27) (13.45) (−6.72) (−5.38) (−6.60) (−5.30)
LEV 0.0609 −0.0746⁎⁎⁎ −0.0796⁎⁎⁎ −0.0201 −0.0926⁎⁎⁎ −0.0935⁎⁎⁎ −0.0887⁎⁎⁎ −0.0908⁎⁎⁎
(0.56) (−6.45) (−7.14) (0.02) (−5.97) (−6.57) (−5.68) (−6.34)
CASH −0.1838⁎ −0.0402⁎⁎⁎ −0.0452⁎⁎⁎ −0.5988⁎⁎⁎ −0.0347 −0.0325 −0.0324 −0.0304
(2.84) (−2.92) (−3.38) (9.21) (−1.54) (−1.57) (−1.43) (−1.47)
FOREIGN 0.0542⁎ 0.0003 0.0037 0.0231 0.0001 0.0033 −0.0003 0.0030
(3.64) (0.07) (0.97) (0.22) (0.03) (0.68) (−0.07) (0.60)
LOSS 0.0544⁎⁎ 0.0031 0.0043 0.0017 0.0052 0.0083⁎⁎ 0.0054 0.0085⁎⁎
(4.65) (0.93) (1.31) (0.00) (1.22) (2.00) (1.26) (2.04)
SIZE 0.1415⁎⁎⁎ −0.0006 −0.0011 0.2072⁎⁎⁎ −0.0018 −0.0029 −0.0033 −0.0041
(134.49) (−0.19) (−0.35) (106.23) (−0.42) (−0.70) (−0.77) (−1.01)
INTAN 1.2618⁎⁎⁎ 0.0391 0.0508⁎⁎ 0.5128⁎⁎⁎ 0.0224 0.0227 0.0226 0.0227
(223.63) (1.52) (2.03) (12.36) (1.12) (1.18) (1.12) (1.17)
PPE −0.0877⁎ −0.0349⁎⁎⁎ −0.0405⁎⁎⁎ −0.0664 −0.0251⁎⁎ −0.0270⁎⁎⁎ −0.0254⁎⁎ −0.0271⁎⁎⁎
(2.74) (−4.39) (−5.21) (0.49) (−2.39) (−2.72) (−2.42) (−2.73)
INSTO 0.0570 −0.1775⁎⁎⁎
(2.20) (6.87)
ANALYSTS 0.0581⁎⁎⁎ 0.0003
(11.59) (0.00)
FIRM AGE −0.0521⁎⁎ −0.0218
(5.42) (0.33)
BDSIZE 0.0004 −0.0203⁎⁎
(0.00) (4.76)
PINDDIR 0.1557⁎⁎ −0.2403⁎
(3.88) (3.44)
CEODUAL 0.0103 0.0775⁎
(0.17) (3.13)
Year FE Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes No No No No
Cluster by firm Yes Yes Yes Yes Yes Yes Yes Yes
N 16,124 15,409 15,409 5548 5300 5300 5300 5300
Pseudo/ R2 0.1431 0.1158 0.2049 0.0885 0.1543 0.2410 0.1531 0.2392
This table presents the results of Heckman Test. All model specifications employ robust standard errors, with one-way clustered t-statistics, which
are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-
percent levels, respectively. See Appendix 1 for the variable definitions.
tax avoidance decision of firm. As such, we conduct a number of tests using CEOs equity compensation, value implication of ac-
quisitions, and CEO overconfidence to distinct between efficiency and opportunistic motives of corporate acquisitions which drive tax
avoidance.
5.3.1. The role of audit quality

Our results so far are consistent with the notion in extant literature that CEOs' aggressive characteristics such as overconfidence
and narcissism affect their decision to be involved in opportunistic activities in order to self-appropriate shareholder wealth in
13
keeping with their own utility maximizing objectives. For example, Aktas et al. (2016) suggest that CEO narcissism can affect the
takeover process and argue that psychological characteristics of CEOs in both bidding and target firms are important considerations
in M&A decision. Olsen and Stekelberg (2016) and Chyz et al. (2015) find that narcissistic and overconfident CEOs tend to be more
tax aggressive. Given that income taxes could amount to as much as one-half of a firm's net income, these items are mostly considered
to be material to financial statements and thus, are subject to auditors' investigation and evaluation. It is, therefore, interesting to
examine whether and how auditors play in this tax aggressiveness game as well.
Donohoe and Knechel (2014) suggests that aggressive tax planning by client firms likely increases the litigation risk faced by
incumbent auditors because shareholders often hold auditors responsible for tax-related deficiencies in the financial statements. In
the same vein, Klassen et al. (2015) also show that firms that prepare their own tax returns are associated with higher tax aggres-
siveness but less tax avoidance when audited by Big N auditors. The above discussion suggest that quality of audit works are likely to
have influence on the association between acquisitiveness and tax avoidance.
We carried out several tests to examine the influence of audit quality on the association between firm acquisitiveness and tax
avoidance. First, using auditor size as a measure of audit quality (DeAngelo, 1981), we re-estimate our main regression models within
the subsamples of firm-years with Big N and non-Big N auditors. Then, we explore the moderating effect of audit quality by in-
corporating BIGN dummy variable and its interaction term with acquisitive measures (ACQ*BIGN) in our main regression models.
Second, we employ the city-level auditor industry specialization (SPEC) used in prior studies (e.g., Francis et al., 2005; Fung et al.,
2012) as a more direct measure of audit quality, and re-estimate the above regression analyses. Finally, since majority of our sample
firms are audited by one of Big N auditors, we re-estimate the regression of tax avoidance on acquisitiveness and control variables
within the subsamples of firm-years related to each individual Big N auditor (i.e. Deloitte, Ernst and Young, KPMG and PWC). This
allows us to tease out the influence of different quality of audit services provided by each Big N auditor. The results of the above
analyses are reported in Table 7. The results of re-estimating the main regression models continue to show negative coefficients on
both measures of acquisitiveness within the subsamples of firm-years with Big N and non-Big N auditors (columns i and ii in the Panel
A of Table 7). The absolute value of coefficients on measures of acquisitiveness are smaller in the Big N subsample suggesting a
weaker effect of acquisitiveness in the presence of higher audit quality. More specifically, we observe positive and statistically
significance coefficients on the interaction terms between our acquisitiveness and Big N dummy variable (column iii in the Panel A of
Table 7), indicating that the association is more pronounced when the auditor is one of non-Big N audit firms (i.e., BIGN = 0). We
find qualitatively similar results in Panel B of Table 7 when we use auditor industry specialization as a proxy for audit quality. The
findings show that the impact of acquisitiveness on tax avoidance is less pronounced when a firm uses an industry specialist auditor as
indicated by the interaction term with acquisitiveness measures (ACQ*SPEC) in our regression models. Finally, we present the
regression results within each subsample of individual Big N auditor in Panel C of Table 7. The results show that the association is less
pronounced for firms that are audited by PWC and KPMG as indicated by the insignificant coefficients of ACQ in 7 out of 8 cases.
However, we do not find evidence that the association between acquisitiveness and tax avoidance is lessened when firms are audited
by Deloitte and Ernst and Young (EY).12 These findings provide interesting insight that the influence of audit quality provided by Big
N auditors on the relation between acquisitiveness and tax avoidance is different among Big N auditors.
5.3.2. CEO equity based compensation

Prior literature suggests that equity based compensation align managerial incentives with those of shareholders. We investigate
the conjecture that agency motive is the main driver of tax management by investigating the effect of CEOs equity based compen-
sation. We argue that when managers have high EBC, they are less likely to engage in acquisitions which destroy shareholder wealth
in the long run. Therefore, we expect that such managers are less likely to undertake acquisitions for the sake of increasing the size of
the firm for prestige and power. This is because these managers are cautious not to invest in negative NPV projects and to employ
high risk appetite. Consistently, Datta et al. (2001) show that managers with high equity based compensation make investment
decisions that create shareholder wealth. On the other hand, Rego and Wilson (2012) argue that managers with high equity based
compensation undertake risky tax strategies and accordingly report that larger equity risk incentives are associated with greater tax
risk. Based on this premise, we argue that acquisitive managers who have less equity based compensation are associated with higher
acquisitions to extract private benefits since their compensation structure is not aligned with those of shareholders. We conjecture
that such managers are similarly linked to other risk taking activities such as engaging in high risk tax avoidance activities.
We substantiate our theoretical discussion above by empirically investigating the moderating effect of CEO's equity compensation
on the association between managerial acquisitiveness and tax avoidance. As such, we include CEO's equity compensation (EQINC),
and its interaction with ACQ (ACQ*EQINC) in Eq. (1). The results, reported in Table 8, show that the coefficient on either measures of
ACQ (i.e., ACQNO and ACQVALUE) are negative and significant implying that managerial acquisitiveness is positively associated with
corporate tax avoidance even after controlling for CEO's equity based compensation in respective models. Consistent with our
prediction, the coefficient on the interaction term (ACQ*EQINC) is significantly positive indicating a weak relationship between
managerial acquisitiveness and tax avoidance in the presence of high equity based compensation of CEOs. Consistent with agency
motive, the results further support the idea that acquisitive firms engage in higher corporate tax avoidance in the absence of indirect
monitoring effect through compensation.
We further investigate by identifying the acquisition attempts made by CEOs where they are accompanied by large and permanent
12
In un-tabulated analyses, we restrict our sample to firm-years before 2002 and find no evidence that the effect of acquisitiveness on tax
avoidance is lessened when firms are audited by Arthur Anderson.
14
Table 7
Managerial acquisitiveness and tax avoidance: the role of audit quality.
Panel A: Big N auditor
F.A. Gul, et al.
Variable ACQNO ACQVALUE
CASH ETR CASH ETRLT CASH ETR CASH ETRLT
(i) (ii) (iii) (i) (ii) (iii) (i) (ii) (iii) (i) (ii) (iii)
⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎
Intercept 0.2714 0.2163 0.3364 0.2759 0.2190 0.3384 0.2562 0.2412 0.2782 0.2587 0.2696 0.3261⁎⁎⁎
(17.25) (3.84) (22.26) (17.41) (3.91) (24.41) (17.72) (5.25) (17.58) (17.71) (7.17) (26.17)
ACQ −0.0077⁎⁎⁎ −0.0165⁎⁎ −0.0174⁎⁎⁎ −0.0182⁎⁎⁎ −0.0423⁎⁎⁎ −0.0204⁎⁎⁎ −0.0080⁎⁎⁎ −0.0188⁎⁎⁎ −0.0429⁎⁎⁎ −0.0121⁎⁎⁎ −0.0281⁎⁎ −0.0357⁎⁎⁎
(−5.35) (−2.34) (−2.70) (−4.27) (−2.67) (−4.00) (−6.01) (−3.48) (−3.00) (−3.34) (−1.97) (−2.65)
BIGN −0.0041 0.0006 −0.0043 0.0144⁎⁎
(−0.38) (0.06) (−0.59) (2.09)
ACQ×BIGN 0.0116⁎ 0.0149⁎⁎⁎ 0.0247⁎ 0.0255⁎
(1.77) (2.80) (1.67) (1.83)
CONTROLS Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Year and Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Cluster by firm Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
N 10,514 813 11,327 10,514 813 11,327 10,514 813 11,327 10,514 813 11,327
Adj. R2 0.1610 0.1167 0.1412 0.1600 0.1194 0.1758 0.2048 0.2013 0.15558 0.2018 0.1954 0.1743
Panel B: City-level auditor industry specialization
15
ACQNO ACQVALUE
CASH ETR CASH ETRLT CASH ETR CASH ETRLT
(i) (ii) (iii) (i) (ii) (iii) (i) (ii) (iii) (i) (ii) (iii)
Intercept 0.2694⁎⁎⁎ 0.2741⁎⁎⁎ 0.2750⁎⁎⁎ −0.2550⁎⁎⁎ 0.2604⁎⁎⁎ 0.3283⁎⁎⁎ 0.2734⁎⁎⁎ −0.2828⁎⁎⁎ 0.2773⁎⁎⁎ −0.2572⁎⁎⁎ 0.2631⁎⁎⁎ 0.3245⁎⁎⁎
(−16.75) (−7.28) (19.53) (−17.17) (8.34) (26.05) (16.91) (−7.45) (27.15) (−17.17) (8.36) (26.05)
ACQ −0.0071⁎⁎⁎ −0.0157⁎⁎⁎ −0.0149⁎⁎⁎ −0.0076⁎⁎⁎ −0.0144⁎⁎⁎ −0.0123⁎⁎⁎ −0.0170⁎⁎⁎ −0.0373⁎⁎⁎ −0.0401⁎⁎⁎ −0.0119⁎⁎⁎ −0.0211⁎⁎ −0.0287⁎⁎⁎
(−4.92) (−3.55) (−3.54) (−5.74) (−3.73) (−3.17) (−3.83) (−3.57) (−3.24) (−3.16) (−2.26) (−3.17)
SPEC −0.0103 0.0102 −0.0043⁎⁎⁎ 0.0156
(−1.38) (1.48) (3.16) (1.48)
ACQ×SPEC 0.0074⁎ 0.0068⁎ 0.0238⁎⁎ 0.0195⁎
(1.72) (1.69) (2.04) (1.69)
CONTROLS Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Year and Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Cluster by firm Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
N 7387 3940 11,327 7387 3940 11,327 7387 3940 11,327 7387 3940 11,327
Adj. R2 0.1492 0.1835 0.1567 0.1919 0.2397 0.1770 0.1483 0.1830 0.1559 0.1890 0.2397 0.1758
(continued on next page)

Table 7 (continued)
Panel C: Individual BIGN auditor

F.A. Gul, et al.
Deloitte Ernst and Young
ACQNO ACQVALUE ACQNO ACQVALUE
CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT
⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎

Intercept 0.2673 0.3206 0.2724 0.3196 0.2721 0.3675 0.2851 0.3699⁎⁎⁎
(8.87) (13.61) (8.65) (13.35) (9.68) (15.83) (9.80) (15.90)
ACQ −0.0117⁎⁎⁎ −0.0104⁎⁎⁎ −0.0158⁎ −0.0168⁎⁎ −0.0059⁎⁎ −0.0052⁎⁎ −0.0168⁎ −0.0128⁎
(−3.92) (−3.54) (−1.71) (−2.17) (−2.04) (−2.08) (−1.73) (−1.68)
CONTROLS Yes Yes Yes Yes Yes Yes Yes Yes
Year and Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
N 2471 2471 2471 2471 2717 2717 2717 2717
Adj. R2 0.1406 0.1672 0.1358 0.1626 0.1650 0.1896 0.1642 0.1888
Price waterhouse Coopers KPMG
ACQNO ACQVALUE ACQNO ACQVALUE
CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT CASH ETR CASH ETRLT
16
⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎
Intercept 0.3163 0.3300 0.3206 0.3312 0.3411 0.3426 0.3403 0.3399⁎⁎⁎
(11.19) (11.95) (11.17) (11.9) (12.72) (13.17) (12.75) (13.09)
ACQ −0.0044 −0.0038 −0.0174⁎⁎ −0.0070 −0.0051 −0.0027 −0.0083 0.0038
(−1.51) (−1.41) (−195) (−0.83) (−1.57) (−0.92) (−0.98) (0.47)
CONTROLS Yes Yes Yes Yes Yes Yes Yes Yes
Year and Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
N 2307 2307 2307 2307 1751 1751 1751 1751
Adj. R2 0.1633 0.1718 0.1638 0.1711 0.1606 0.2140 0.1598 0.2137
This table presents the regression results of tax avoidance (CASH ETR and CASH ETRLT) on acquisitiveness (ACQNO & ACQVALUE) and control variables conditional on the level of audit quality. Panels A
and B present the regression results based on BIGN auditor and city-level auditor industry specialization as proxies for audit quality, respectively. Panel C shows the regression results within the
subsamples of firm-years related to each individual BIGN auditor. All model specifications employ robust standard errors with one-way clustered t-statistics, which are reported in the parentheses below
each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
Table 8
Mergers and acquisitions and tax avoidance: equity incentive.
ACQNO ACQVALUE
Variable CASH ETR CASH ETRLT CASH ETR CASH ETRLT
Intercept 0.2816⁎⁎⁎ 0.2809⁎⁎⁎ 0.3760⁎⁎⁎ 0.2780⁎⁎⁎

(8.84) (10.05) (14.1) (9.88)
ACQ −0.0082⁎⁎⁎ −0.0061⁎⁎⁎ −0.0143⁎⁎ −0.0095⁎
(−3.54) (−3.11) (−2.03) (−1.68)
ACQ*EQINC 0.0163⁎⁎ 0.0107⁎⁎ 0.0891⁎⁎⁎ 0.0411⁎⁎
(2.53) (1.96) (3.64) (2.10)
EQINC −0.0535⁎⁎⁎ −0.0492⁎⁎⁎ −0.0390⁎⁎⁎ −0.0380⁎⁎⁎
(−2.99) (−3.35) (−3.51) (−4.16)
EBITDA 0.1168⁎⁎⁎ 0.1012⁎⁎⁎ 0.1162⁎⁎⁎ 0.1003⁎⁎⁎
(5.52) (5.13) (5.48) (5.07)
R&D −0.3971⁎⁎⁎ −0.4073⁎⁎⁎ −0.3895⁎⁎⁎ −0.4050⁎⁎⁎
(−7.72) (−8.41) (−7.56) (−8.35)
ADV −0.2343⁎⁎⁎ −0.1772⁎⁎ −0.2374⁎⁎⁎ −0.1776⁎⁎
(−2.72) (−2.05) (−2.74) (−2.06)
SG&A 0.0452⁎⁎⁎ 0.0485⁎⁎⁎ 0.0433⁎⁎⁎ 0.0476⁎⁎⁎
(3.83) (4.10) (3.67) (4.02)
CAPEX −0.0682⁎⁎⁎ −0.1288⁎⁎⁎ −0.0653⁎⁎⁎ −0.1292⁎⁎⁎
(−2.85) (−5.98) (−2.70) (−5.99)
ΔSALES −0.0785⁎⁎⁎ −0.0508⁎⁎⁎ −0.0815⁎⁎⁎ −0.0520⁎⁎⁎
(−9.24) (−7.54) (−9.49) (−7.63)
LEV −0.0775⁎⁎⁎ −0.0787⁎⁎⁎ −0.0787⁎⁎⁎ −0.0787⁎⁎⁎
(−6.01) (−6.35) (−6.06) (−6.32)
CASH −0.0344⁎⁎ −0.0429⁎⁎⁎ −0.0356⁎⁎ −0.0432⁎⁎⁎
(−2.04) (−2.66) (−2.13) (−2.69)
FOREIGN 0.0002 0.0070⁎ 0.0001 0.0071⁎
(0.04) (1.74) (0.03) (1.76)
LOSS 0.0115⁎⁎⁎ 0.0126⁎⁎⁎ 0.0115⁎⁎⁎ 0.0126⁎⁎⁎
(3.09) (3.52) (3.07) (3.51)
SIZE −0.0020 −0.0017 −0.0024 −0.0022
(−1.33) (−1.24) (−1.62) (−1.58)
INTAN 0.0316⁎⁎ 0.0212 0.0294⁎⁎ 0.0199
(2.24) (1.54) (2.08) (1.44)
PPE −0.0283⁎⁎⁎ −0.0265⁎⁎⁎ −0.0271⁎⁎⁎ −0.0259⁎⁎⁎
(−3.15) (−2.98) (−3.01) (−2.92)
Year FE Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes
Cluster by firm Yes Yes Yes Yes
N 7589 7589 7589 7589
Adj. R2 0.1539 0.2290 0.1536 0.2281
This table presents the regression results of the tax avoidance measures (CASH ETR and CASH ETRLT) on acquisitiveness variables (ACQNO &
ACQVALUE) interacting with equity incentive and control variables. All model specifications employ robust standard errors with one-way clustered
t-statistics, which are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the
one-, five-, and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
increase in equity based compensation in the year following the acquisition. Yim (2013) argues that when CEOs engage in M&As to
improve their compensation, such acquisition attempts are more likely to indicate CEOs effort to extract rents and private benefits.
We attempt to quantify the effect of acquisition propensity complemented by increase compensation in post-acquisition period and
show how this channel alone could explain the tax avoidance behavior of firm. To explore this possibility, we create two dummy
variables (ACQNO_INCR and ACQVALUE_INCR) when a firm's acquisitiveness (ACQNO and ACQVALUE) is above its year/industry
median and CEO equity compensation increases from pre-acquisition announcement period (t-1) to the post-acquisition year (t + 1),
and 0 otherwise. The un-tabulated results show that the coefficient of ACQNO_INCR and ACQVALUE_INCR is negative and significant
in four measures of corporate tax avoidance. These results provide evidence that high acquisitive CEOs accompanied by large in-
crease in equity-based compensation involved with more tax avoidance.
Taken together, our results suggest that the effect of acquisitiveness and corporate tax avoidance is weak when managers have
high equity based compensation and as this compensation act as an indirect monitoring effect on managerial decisions in risk taking.
Therefore we conclude that the presence of high CEOs equity based compensation moderate the relationship between acquisitiveness
and corporate tax avoidance. The result support hypothesis 2 that the association between managerial acquisitiveness and tax
avoidance is stronger for opportunistic and agency motivated acquisitions.
5.3.3. Stock market based M&A performance

As discussed earlier, manager's merger and acquisition decisions can either create value or destroy shareholder wealth. A firm's
17
decision to takeover another firm can be the result of different factors such as market structure, foreign competition and regulatory
pressures other than to extract rent and private benefits. In our second hypothesis, we argue that firms which destroy shareholder
wealth in the form of M&As generally tend to engage in higher tax avoidance in compared to firms that create value for shareholders.
To further validate our second hypothesis, we incorporate a dummy variable (VALCRT) based on 3-day abnormal returns. If the 3-
day cumulative abnormal return is positive, we categorise such firms as value creating M&A firms, and zero otherwise.13 Therefore,
based on investor's reaction on M&A announcements and using 3-day announcement period abnormal returns, we classify our sample
into two groups: value creating and value destroying acquisitions. We estimate the Eq. (1) by incorporating VALCRT and interact this
variable with managerial acquisitiveness proxies in the respective models. We expect that firms that create shareholder wealth in M&
A announcements are associated with lower tax avoidance than firms that destroy shareholder wealth.
We report the findings based on ACQNO and ACQVALUE in Table 9. Columns 1 to 4 report the results using ACQNO and Columns
5 to 8 report the results using ACQVALUE as proxies for acquisitivness. The results show that acquisitivness proxies still explain tax
avoidance. Consistent to our expectation, we find that the coeffcients on both ACQNO*VALCRT and ACQVALUE*VALCRT is positive
and significant regardless of whether short or long run CASH ETR is used as the dependent variable. The results imply that when
managerial acquisitiveness have value destroying motive such managerial acquisitiveness is strongly related to corporate tax
avoidance. We further re-estimate the regression analysis in each value creating and value destroying M&A subsmaples. The un-
tabulated results show that there is no significant associaiton between managerial acquisitiveness and tax avoidance in value creating
M&A announcements subsample while we observe strong negative association between acquisitivenss and tax avoidance in value
destroying subsample.
These findings provide direct evidence in support of our hypothesis H2 that managerial tendency to engage in tax avoidance is
driven by opportunistic motive of corproate managers. Acquisitive self-interested managers who are opportunisitic and seek private
benefits are associated with higher tax management activities. The findings resolve the previous gap in the literuarute which en-
deavours to directly investigate the managerial motive behind tax avoidance.
5.3.4. CEO overconfidence

We further investigate whether behavioral traits such as managerial acquisitiveness and overconfidence are associated with tax
avoidance policies of bidding firms. Bertrand and Schoar (2003) show that CEO traits can be a source of agency problems. Since
acquisitiveness can proxy for both agency problems and overconfidence trait of managers, we control both variables in the models to
isolate their distinct effect in explaining tax avoidance. Panel A of Table 10 reports our main regression analysis after including
overconfidence measure (OVERCONF) as another independent variable. The results show that both overconfident and managerial
acquisitiveness measures are associated with higher tax avoidance. We further re-estimate the main regression analysis in samples of
firm-years with overconfident CEOs and for less overconfident CEOs to understand whether CEO overconfidence has more ex-
planatory power than managerial acquisitiveness. The results of this test, reported in Panels B and C of Table 10, continue to show
negative and significance coefficients on ACQ in three models out of four models estimated. These findings reveal that managerial
acquisitiveness and overconfidence traits have distinct effects on tax avoidance.
5.4. Managerial acquisitiveness, tax avoidance and firm performance
We attempt to further investigate the incentives of acquisitive managers in conducting tax avoidance using post acquisition
performance of the bidding firms. We examine whether acquisitive managers who have high opportunistic motive in M&A and pursue
tax avoidance simultanously, destroy firm value in the post-acquisition period. The neuclassical view of tax avoidance suggest that
managers implement tax avoidance to transfer wealth from the government authority to shareholders. Acocrding to the view, we
would expect that tax avoidance activities increase the value of the firm and so are considered as value enhancing to shareholders.
Contrary, one can argue that managers intend to implement tax avoidance during the M&A in order to divert tax savings for their own
personal gain and private benefits. This argument is in line with prior M&A literature that suggests acquisitive managers destroy
shareholder wealth (Doukas and Petmezas, 2007; Malmendier and Tate, 2008). Using the M&A sample, we examine whether
heightened acquistive managers who engage in tax avoidance invest the cash savings in positive net present value projects to enhance
the future value of the firm or divert them towards value-destroying projects for rent extractions and private benefits.
Following a number of prior studies (e.g., Anderson and Reeb, 2003; Hubbard and Palia, 1999; Bharadwaj et al., 1999; Hermalin
and Weisbach, 1991), we employ tobin q (TQ) as a measure of firm performance and regress that on measures of managerial
acquisitivness, tax avoidance, and their interaction terms, along with a series of common determints of firm performance.
The dependent variable is defined in year t + 1 because the independent variables are expected to have a lagged effect on firm
performance.
The results, reported in Table 11, show negative coefficients on ACQNO and ACQVALUE as measures of managerial acquisi-
tiveness, which is in line with prior studies that show high acquisitive tendency generally destroys firm value (Doukas and Petmezas,
2007; Malmendier and Tate, 2008). As expected, the coefficients on the interaction term is positive and significant, indicating that the
value destroying effect of high managerial acquisitiveness is stronger when high acquisitive managers undertake more tax avoidance.
13
Since our M&A sample consists of unique number of firm-year observations, we combined the three day announcement period abnormal
returns if any of our sample firms announce more than one acquisitions in a given year. We then, coded these firms as 1 if the 3-day cumulative
abnormal return is positive and zero otherwise.
18
Table 9
Mergers and acquisitions and tax avoidance: acquisitions value.
ACQNO ACQVALUE
Intercept 0.2941⁎⁎⁎ 0.2852⁎⁎⁎ 0.2931⁎⁎⁎ 0.2864⁎⁎⁎

(10.22) (17.73) (10.39) (12.56)
ACQ −0.0067⁎⁎⁎ −0.0079⁎⁎⁎ −0.0143⁎⁎ −0.0102⁎⁎
(−3.26) (−4.56) (−2.24) (−2.02)
ACQ*VALCRT 0.0051⁎⁎ 0.0050⁎⁎ 0.0211⁎⁎ 0.0183⁎⁎⁎
(2.01) (2.35) (2.56) (2.66)
VALCRT −0.0010 −0.0014 0.0027 0.0028
(−0.20) (−0.33) (0.89) (1.09)
EBITDA 0.0989⁎⁎⁎ 0.0782⁎⁎⁎ 0.0974⁎⁎⁎ 0.0759⁎⁎⁎
(4.93) (4.10) (4.86) (4.00)
R&D −0.4295⁎⁎⁎ −0.4327⁎⁎⁎ −0.4316⁎⁎⁎ −0.4354⁎⁎⁎
(−9.26) (−9.92) (−9.31) (−9.97)
ADV −0.1933⁎⁎ −0.1466 −0.1974⁎⁎ −0.1498
(−2.10) (−1.57) (−2.31) (−1.60)
SG&A 0.0497⁎⁎⁎ 0.0495⁎⁎⁎ 0.0494⁎⁎⁎ 0.0493⁎⁎⁎
(4.19) (4.35) (4.16) (4.29)
CAPEX −0.0628⁎⁎⁎ −0.1067⁎⁎⁎ −0.0658⁎⁎⁎ −0.1095⁎⁎⁎
(−2.97) (−5.58) (−3.08) (−5.68)
ΔSALES −0.0774⁎⁎⁎ −0.0470⁎⁎⁎ −0.0774⁎⁎⁎ −0.0481⁎⁎⁎
(−10.86) (−7.27) (−10.64) (−7.27)
LEV −0.0826⁎⁎⁎ −0.0758⁎⁎⁎ −0.0819⁎⁎⁎ −0.0773⁎⁎⁎
(−6.86) (−6.57) (−6.72) (−6.67)
CASH −0.0534⁎⁎⁎ −0.0511⁎⁎⁎ −0.0514⁎⁎⁎ −0.0472⁎⁎⁎
(−3.41) (−3.32) (−3.28) (−3.06)
FOREIGN 0.0011 0.0111⁎⁎⁎ 0.0011 0.0112⁎⁎⁎
(0.26) (2.77) (0.26) (2.76)
LOSS 0.0124⁎⁎⁎ 0.0152⁎⁎⁎ 0.0125⁎⁎⁎ 0.0155⁎⁎⁎
(3.36) (4.35) (3.38) (4.44)
SIZE −0.0024⁎ −0.0022⁎ −0.0032⁎⁎ −0.0030⁎⁎
(−1.89) (−1.81) (−2.47) (−2.51)
INTAN 0.0225⁎ 0.0088 0.0226⁎ 0.0101
(1.72) (0.70) (1.72) (0.81)
PPE −0.0361⁎⁎⁎ −0.0374⁎⁎⁎ −0.0352⁎⁎⁎ −0.0353⁎⁎⁎
(−4.02) (−4.21) (−3.92) (−3.99)
N 8509 8509 8509 8509
Adj. R2 0.1326 0.1836 0.1322 0.1829
This table presents the regression results of the tax avoidance measures (CASH ETR and CASH ETRLT) on acquisitiveness variables (ACQNO &
ACQVALUE) interacting with M&A value creating dummy and control variables. All model specifications employ robust standard errors with one-
way clustered t-statistics, which are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical
significance at the one-, five-, and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
In robustness tests, we use three-year average TOBIN Q following the acquisition year (i.e., t + 1, t + 2 and t + 3), as the dependent
variable and find qualitatively similar results (un-tabulated). Taken together, our findings imply that acquisitive managers implement
aggressive tax avoidance strategies during the M&A period to satisfy their goal of obtaining personal gains and private benefits rather
than value maximization objective.
5.5. Additional tests
Our analyses so far are conducted using CASH ETR and CASH ETRLT both of which are in the lower end of continuum of tax
planning strategies. We re-estimate our main regression analysis by employing two more aggressive measures of tax avoidance,
namely SHELTER and UTB and report the results in Table 12. The results show that managerial aggressive decision of mergers and
acquisitions is positively associated with aggressiveness in tax avoidance, reconfirming that mergers and acquisitions is another
driver of risky tax strategies of firms.
Finally, a number of prior studies provide empirical evidence that several other factors may influence managerial decisions to
undertake tax avoidance. For example, Boone et al. (2012) find that firms headquartered in more religious U.S. counties have less
propensity to engage in tax avoidance. Frankel and Li (2004) argue that financial analysts can significantly reduce information
opacity between firms and investors by distributing both public and private information to the market through media outlets and
research reports. This allows investors to more effectively monitor managers mitigating their tendency to engage in opportunistic
19
Table 10
Mergers and Acquisitions and Tax Avoidance: CEO Overconfidence.
Panel A: Acquisitiveness and tax avoidance after controlling for CEO overconfidence
ACQNO ACQVALUE

0.3203 ⁎⁎⁎
0.3250⁎⁎⁎
0.3252⁎⁎⁎
(9.63) (12.49) (9.61) (12.45)
ACQ −0.0067⁎⁎⁎ −0.0054⁎⁎⁎ −0.0117⁎⁎ −0.0132⁎⁎⁎
(−3.87) (−3.73) (−2.00) (−3.19)
OVERCONFIDENCE −0.0112⁎⁎⁎ −0.0099⁎⁎⁎ −0.0115⁎⁎⁎ −0.0101⁎⁎⁎
(−2.91) (−2.72) (−2.96) (−2.76)
Controls Yes Yes Yes Yes
N 5912 5912 5912 5912
Adj. R2 0.1498 0.2262 0.1519 0.2275
Panel B: Subsample analysis based on overconfident CEOs
ACQNO ACQVALUE

0.3455 ⁎⁎⁎
0.3516⁎⁎⁎
0.3480⁎⁎⁎
(5.63) (10.97) (5.66) (10.99)
ACQ −0.0054⁎⁎ −0.0048⁎⁎⁎ −0.0172⁎⁎ −0.0096
(−2.14) (−2.08) (−2.29) (−1.52)
N 2473 2473 2473 2473
Adj. R2 0.2223 0.2478 0.1857 0.2464
Panel C: Subsample analysis based on less overconfident CEOs
ACQNO ACQVALUE

0.3151 ⁎⁎⁎
0.3089⁎⁎⁎
0.3202⁎⁎⁎
(7.80) (10.49) (7.73) (10.44)
ACQ −0.0074⁎⁎⁎ −0.0063⁎⁎⁎ −0.0090 −0.0167⁎⁎⁎
(−3.27) (−3.59) (−1.07) (−3.05)
N 3439 3439 3439 3439
Adj. R2 0.1245 0.2582 0.1219 0.2118
This table presents the results of robustness test on the effect of CEO overconfidence. Panel A reports the regression results of the tax avoidance on
managerial acquisitiveness, CEO overconfidence along with the control variables. Panel B and C report the main regression results using subsample
of overconfident and less overconfident CEOs. All model specifications employ robust standard errors, with one-way clustered t-statistics, which are
reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-
percent levels, respectively. See Appendix 1 for the variable definitions.
decisions such as tax avoidance documented by Kim et al. (2011). We re-estimate our Eq. (1) after controlling the effect of religiosity
(RELIGIOSITY) and number of analysts following (ANALYST), and un-tabulated results show that our main finding remain quali-
tatively the same.
6. Conclusion
This study examines whether managerial acquisitiveness is associated with tax avoidance. We measure managerial acquisitiveness
as the acquisition probability, the number of acquisitions, and the proportion of the dollar value of the M&A deal. Our primary
20
Table 11
Mergers and acquisitions and tax avoidance: firm performance.
ACQNO ACQVALUE
Variable CASH CASH CASH CASH
ETR ETRLT ETR ETRLT

1.7427 ⁎⁎⁎
1.7136 ⁎⁎⁎
1.7133⁎⁎⁎
(9.67) (9.56) (9.71) (9.72)
ACQ −0.0584⁎⁎⁎ −0.0531⁎⁎ −0.2393⁎⁎⁎ −0.2455⁎⁎⁎
(−2.69) (−2.26) (−7.12) (−7.53)
ACQ*TAXAVOIDANCE 0.2884⁎⁎ 0.2516⁎⁎ 1.7598⁎⁎⁎ 2.2770⁎⁎⁎
(2.53) (1.97) (2.65) (2.82)
TAX AVOIDANCE −0.4990⁎⁎⁎ −0.4547⁎⁎ −0.3770⁎⁎⁎ −0.4369⁎⁎
(−2.87) (−2.25) (−2.82) (−2.51)
SIZE 0.0509⁎⁎⁎ 0.0509⁎⁎⁎ 0.0456⁎⁎⁎ 0.0454⁎⁎⁎
(4.27) (4.28) (3.92) (3.92)
FIRMAGE −0.0035⁎⁎⁎ −0.0034⁎⁎⁎ −0.0036⁎⁎⁎ −0.0035⁎⁎⁎
(−3.02) (−2.94) (−3.13) (−3.06)
LEV −0.6642⁎⁎⁎ −0.6637⁎⁎⁎ −0.5909⁎⁎⁎ −0.5882⁎⁎⁎
(−5.20) (−5.17) (−4.61) (−4.57)
R&D 4.2915⁎⁎⁎ 4.2896⁎⁎⁎ 4.3232⁎⁎⁎ 4.3175⁎⁎⁎
(7.79) (7.77) (7.88) (7.84)
CASH 1.3175⁎⁎⁎ 1.3191⁎⁎⁎ 1.2975⁎⁎⁎ 1.2997⁎⁎⁎
(8.60) (8.61) (8.50) (8.53)
STDRET −1.2520⁎⁎⁎ −1.2527⁎⁎⁎ −1.1827⁎⁎⁎ −1.1792⁎⁎⁎
(−4.21) (−4.22) (−4.01) (−4.01)
INSTO 0.1557⁎⁎⁎ 0.1562⁎⁎⁎ 0.1517⁎⁎⁎ 0.1523⁎⁎⁎
(2.99) (3.00) (2.93) (2.95)
N 10,172 10,172 10,172 10,172
Adj. R2 0.2325 0.2323 0.2372 0.2372
This table presents the regression results of firm performance, proxied by TOBINQ, on managerial acquisitiveness, tax avoidance, their interactions,
and control variables. All model specifications employ robust standard errors, with one-way clustered t-statistics, which are reported in the par-
entheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels,
respectively. See Appendix 1 for the variable definitions.
measure of tax avoidance is short and long-term cash effective tax rates. We find that firms that announce M&A, and within M&A
firms that appear to undertake frequent and make large value acquisitions are associated with higher tax avoidance. Our findings are
robust after controlling a number of board features, CEO and CFO characteristics and determinants of firms' information environment
including stock hyping. We can explain this finding both based on managerial opportunistic and efficiency motives. However, our
further analysis show that the association between managerial acquisitiveness and tax avoidance is stronger when self-interested and
opportunistic motivated managers announce acquisitions. Further analyses provide more support for the finding by showing that the
association between managerial acquisitiveness and tax avoidance is weaker when bidding firms receive higher audit quality, CEOs
receive high equity based compensation, and when the acquisitions are considered to be value creating.
To some extent, the above findings answer the question of what is the key motive of tax avoidance surrounding the M&A
announcement year. Managers who are more acquisitive have a high propensity to destroy shareholder value by undertaking frequent
acquisitions and implementing complex tax avoidance strategies for rent-seeking purposes. We try to reconcile our main findings by
examining the performance of the bidding firms in the post-acquisition period. We find that managerial acquisitiveness is system-
atically associated with significant reduction in firm performance in the post-acquisition period.
This study makes several contributions to the literature. We reveal that managerial acquisitiveness is a new firm-level determinant
of tax avoidance. Although acquisition is considered as one of the most significant corporate investment decisions, there has been no
evidence regarding how managerial acquisitiveness affects tax avoidance. This study's findings also increase our understanding of
how a firm's managerial acquisitiveness tendency is linked to tax avoidance, which has a destructive impact on firm value. To some
extent, our study also resolves the issue of whether tax avoidance activities of bidding firms is driven by behavioral traits of managers
and whether such tax avoidance tendency pursue their opportunistic motive. Specifically, our findings suggest that acquisitive
managers engage in tax avoidance to pursue self-interest and private control benefits.
Acknowledgments
This paper was awarded by SIRCA as one of the top papers in the 2015 SIRCA Fifth Young Researcher Workshop. We acknowledge
the helpful comments from the participants in the SIRCA Fifth Young Researcher Workshop. We gratefully acknowledge helpful
comments from Robert Faff, Henk Berkman, Andy Kim, Petko Kalev, Greg Shailer, Edward Podosky, Chandrasekhar Krishnamurti,
21
Table 12
Additional measures of tax avoidance.
Variable SHELETER UTB SHELETER UTB SHELTER UTB
Intercept −4.1428⁎⁎⁎ −0.0045⁎⁎⁎ −4.3791⁎⁎⁎ −0.0043⁎⁎⁎ −4.4342⁎⁎⁎ −0.0043⁎⁎⁎

(54.25) (−15.06) (−32.61) (−8.15) (−37.43) (−8.35)
ACQ 0.0288⁎⁎⁎ 0.0001⁎⁎⁎ 0.0227⁎ 0.0001⁎⁎ 0.2020⁎ 0.0002⁎
(2.77) (3.41) (1.76) (2.50) (1.81) (1.71)
EBITDA 6.1297⁎⁎⁎ 0.0130⁎⁎⁎ 5.3779⁎⁎⁎ 0.0120⁎⁎⁎ 5.3834⁎⁎⁎ 0.0121⁎⁎⁎
(30.20) (32.21) (30.66) (22.63) (30.70) (22.76)
R&D 0.5624⁎⁎⁎ 0.0905⁎⁎⁎ 0.4911 0.0902⁎⁎⁎ 0.4855 0.0903⁎⁎⁎
(2.67) (70.46) (1.35) (64.74) (1.35) (64.34)
ADV −0.0459 −0.0011 0.0022 0.0021 0.0092 0.0022
(−0.15) (−0.74) (0.01) (1.18) (0.02) (1.22)
SG&A −0.0972⁎⁎ 0.0148⁎⁎⁎ −0.0094 0.0130⁎⁎⁎ 0.0030 0.0131⁎⁎⁎
(−1.95) (35.43) (−0.12) (27.67) (0.04) (27.77)
CAPEX −0.0337 0.0002 0.1609 0.0006 0.2135 0.0007
(−0.31) (0.58) (0.94) (1.14) (1.23) (1.28)
ΔSALES −0.1576⁎⁎⁎ −0.0180⁎⁎⁎ −0.0835 −0.0180⁎⁎⁎ −0.1141 −0.0180⁎⁎⁎
(−3.63) (−90.25) (−0.89) (−48.20) (−1.25) (−47.94)
LEV −2.2765⁎⁎⁎ 0.0018⁎⁎⁎ −2.1590⁎⁎⁎ 0.0016⁎⁎⁎ −2.1792⁎⁎⁎ 0.0016⁎⁎⁎
(−39.83) (9.01) (−22.18) (4.96) (−22.42) (4.72)
CASH 0.3368⁎⁎⁎ 0.0014⁎⁎⁎ 0.4210⁎⁎⁎ 0.0013⁎⁎⁎ 0.4209⁎⁎⁎ 0.0012⁎⁎⁎
(5.38) (5.26) (3.66) (3.94) (3.67) (3.86)
FOREIGN −0.1602⁎⁎⁎ −0.0001 −0.0101 0.0002 −0.0122 0.0002
(−2.82) (−0.91) (−0.23) (1.49) (−0.28) (1.42)
LOSS 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
(0.00) (−0.33) (0.00) (0.39) (0.00) (0.36)
SIZE 0.6731⁎⁎⁎ 0.0011⁎⁎⁎ 0.6738⁎⁎⁎ 0.0011⁎⁎⁎ 0.6789⁎⁎⁎ 0.0011⁎⁎⁎
(120.79) (69.52) (68.57) (36.04) (70.05) (38.77)
INTAN −0.3673⁎⁎⁎ −0.0005⁎⁎⁎ −0.2772⁎⁎⁎ −0.0005 −0.2813⁎⁎⁎ −0.0004
(−6.01) (−2.83) (−2.75) (−1.55) (−2.79) (−1.54)
PPE −0.2798⁎⁎⁎ −0.0014⁎⁎⁎ −0.2905⁎⁎⁎ −0.0013⁎⁎⁎ −0.2869⁎⁎⁎ −0.0013⁎⁎⁎
(−4.55) (−11.40) (−5.01) (−6.50) (−4.83) (−6.54)
Year and industry fixed effects Yes Yes Yes Yes Yes Yes
N 13,359 19,019 3297 4842 3297 4842
Adj. R2 0.8879 0.8921 0.8805 0.8846 0.8810 0.8845
This table presents the regression results of the main analysis using aggressive measures of tax avoidance (SHELTER & UTB). All model specifications
employ robust standard errors, with one-way clustered t-statistics, which are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎,
⁎⁎
, and ⁎ correspond to statistical significance at the one-, five-, and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
Hasibul Chowdhury and participants at the 2016 Asian FA Conference in Bangkok, 2017 Annual Symposium of Journal of
Contemporary Accounting and Economics in Taiwan and 2017 Financial Markets and Corporate Governance Conference in
Wellington. All errors or omissions are our own.
Appendix 1. Variable definitions
Variable Definition
Tax measures
CASH ETR The cash effective tax rate, defined as the cash tax paid divided by the
pre-tax book income before special items
CASH ETRLT The cash effective tax rate, defined as the total cash tax paid divided
by the total pre-tax book income before special items for last five
years prior to acquisition announcement
GAAP ETR The GAAP effective tax rate, defined as the income tax expense
divided by the pre-tax book income before special items
GAAP ETRLT The GAAP effective tax rate, defined as the total income tax expense
divided by the total pre-tax book income before special items for last
five years prior to acquisition announcement
SHELTER The tax sheltering score estimated based on the model by Wilson
(2009):
22
SHELTER = −4.30 + 6.63 * BTD − 1.72 * LEV + 0.66 * SIZE + 2.26 *

ROA + 1.62 * FOR INCOME + 1.56 * R&D
UTB The predicted unrecognized tax benefits at the end of year t. Calculated
based on the estimated coefficients (PT_ROA, SIZE, FOR_SALE, R&D,
DIS_ACCR, LEV, MTB, SG&A, SALES_GR) from the following prediction
model of Rego and Wilson (2012):
UTB = α0 + α1PT_ROAI,T + α2SIZEI,T + α3FOR_SALEI,T + α4R&
DI,T + α5LEVI,T + α6DISC_ACCRI,T + α7SG&AI,T + α8MTBI,T + α9SALES
GRI,T
Managerial acquisitiveness measures
ACQ The firm's acquisitiveness, defined as (1) the acquisition probability of
firm (ACQPR), (ii) the number of acquisitions announced during a fiscal
year (ACQNO), and (iii) the proportion of the total dollar value of the
deal in a fiscal year relative to the market value of equity of a bidder in
the pre-acquisition fiscal year (ACQVALUE).
Firm characteristics
EBITDA Earnings before interest, taxes, depreciation, and amortization divided
by lagged total assets
R&D The research and development expense divided by net sales; when
missing, coded zero
ADV The advertising expense divided by net sales; when missing, coded zero
SG&A The selling, general, and administrative expense divided by net sales;
when missing, coded zero
CAPEX Capital expenditures divided by gross property, plant, and equipment
ΔSALES The annual percentage change in net sales
LEV The sum of long-term debt and long-term debt in current liabilities
divided by total assets
CASH Cash and cash equivalents divided by total assets
FOREIGN The firm has a non-missing, non-zero value for pre-tax income from
foreign operations
LOSS An indicator coded 1 if the firm has a non-missing value of tax loss
carry-forward
SIZE The natural log of total assets
INTAN The ratio of intangible assets to total assets
PPE Gross property, plant, and equipment divided by total assets
ROA Pre-tax earnings divided by total assets
OVERCONF If CEO holds more than 100% in the money options two times or more
during the sample period, we termed such CEO as overconfident. It is a
dummy variable which takes the value of one from the first time CEO
shows above mentioned pattern of option holding to the rest of the
sample period, otherwise zero (Kim et al., 2011).
TQ The market value of total assets divided by the book value of total
assets, where the market value of assets is calculated as the book value
of total assets minus the book value of common equity plus the number
of common shares outstanding times the stock price
FIRMAGE The natural log of the number of years since the firm's first appearance
in COMPUSTAT
STDRET Standard deviation of monthly stock returns over the fiscal year.
Corporate governance variables
BDSIZE Number of directors on the board.
DUALITY A dummy variable with the value of 1 if CEO and the chairman of the
board is the same person and 0 otherwise.
PINDIR Total number of non-executive directors in the firm, scaled by the board
size.
CEOAGE The age of CEO.
CEOTENURE The number of years that a CEO continuously holds this position in the
firm.
23
CEOFEMALE An indicator variable coded 1 if a firm's CEO is a female and 0

otherwise.
CFOAGE The age of CFO.
CFOTENEURE The number of years that a CFO continuously holds this position in the
firm.
CFOFEMALE An indicator variable coded 1 if a firm's CFO is a female and 0
otherwise.
Other variables
ANALYSTS The natural log of 1+ number of analysts providing annual earnings
forecasts
INSTHLDG The percentage of total institutional ownership in the firm
BIGN A dummy variable coded 1 if the firm's auditor is one of the Big Five or
Four audit firms, and 0 otherwise.
SPEC A dummy variable coded 1 if the firm's auditor is a city industry leader,
and 0 otherwise.
LAGDIFFMAF The average difference between a firm's management earnings forecast
and actual earnings over the year prior to acquisition.
FSIZE The natural logarithm of file size of 10-K filing.
DQ A measure of disaggregation of accounting data which count the
number of non-missing financial items reported in firms' annual reports,
including items both in the financial statements and in the footnotes, as
captured by Compustat. See Chen et al. (2015) for details.
VALCRT An indicator variable coded 1 if the 3-day announcement period
abnormal returns of the bidding firm is positive and zero for negative
announcement period abnormal returns.
EQINC Natural logarithm of the Black–Scholes value of CEO's stock option
grants and the market value of restricted and unrestricted stock grants.
ACQNO_INCR An indicator variable coded 1 if a firm's acquisitiveness (measured as
the total number of acquisitions announced in a given year) is above its
year/industry median and CEO equity compensation increases from
pre- to the post-acquisition year, and 0 otherwise.
ACQVALUE_INCR An indicator variable coded 1 if a firm's acquisitiveness (measured as
the proportion of the total dollar value of the deal to the market value
of equity of a bidder) is above its year/industry median and CEO equity
compensation increases from pre- to the post-acquisition year, and 0
otherwise.
Appendix 2. The association between managerial acquisitiveness and corporate tax avoidance after controlling CEO and
CFO characteristics
Intercept 0.3528*** 0.3243*** 0.2791*** 0.2528*** 0.2839*** 0.1890***

(6.98) (6.55) (5.05) (4.87) (5.10) (2.61)
ACQ −0.0130*** −0.0125*** −0.0066** −0.0040* −0.0223** −0.0154*
(−3.63) (−4.02) (−2.41) (−1.73) (−2.15) (−1.76)
EBITDA 0.1387*** 0.1636*** 0.1959*** 0.2234*** 0.1934*** 0.2013***
(5.20) (6.34) (4.50) (5.44) (4.43) (4.67)
R&D −0.4327*** −0.4526*** −0.4630*** −0.5635*** −0.4693*** −0.5155***
(−5.93) (−6.12) (−5.03) (−6.43) (−5.09) (−5.05)
ADV −0.2151** −0.1203 −0.3210** −0.1452 −0.3236** −0.0267
(−2.21) (−1.22) (−2.30) (−1.00) (−2.32) (−0.16)
SG&A 0.0541*** 0.0535*** 0.0264 0.0409* 0.0237 0.0312
(2.91) (3.13) (1.11) (1.85) (1.00) (1.19)
CAPEX −0.0963*** −0.1770*** −0.0249 −0.1206*** −0.0344 −0.1320***
(−2.85) (−5.94) (−0.50) (−2.62) (−0.68) (−2.86)
ΔSALES −0.1199*** −0.0707*** −0.1140*** −0.0845*** −0.1108*** −0.0842***
(−9.67) (−7.34) (−5.39) (−4.86) (−5.16) (−4.73)
24
LEV −0.0750*** −0.0735*** −0.0846*** −0.0928*** −0.0796*** −0.0935***

(−4.68) (−4.69) (−3.57) (−4.18) (−3.29) (−4.11)
CASH −0.0461** −0.0521** −0.0344 −0.0306 −0.0358 −0.0327
(−2.05) (−2.40) (−1.02) (−0.93) (−1.06) (−0.98)
FOREIGN −0.0095 −0.0038 −0.0060 0.0027 −0.0068 0.0026
(−1.55) (−0.64) (−0.71) (0.35) (−0.79) (0.31)
LOSS −0.0045 −0.0030 0.0096 0.0071 0.0089 0.0036
(−0.94) (−0.63) (1.47) (1.06) (1.36) (0.53)
SIZE −0.0069*** −0.0070*** −0.0070** −0.0064** −0.0080*** −0.0065**
(−3.05) (−3.09) (−2.36) (−2.18) (−2.70) (−2.11)
INTAN −0.0163 −0.0041 0.0265 0.0338 0.0252 0.0408*
(−0.90) (−0.23) (1.10) (1.40) (1.04) (1.64)
PPE −0.0454*** −0.0436*** −0.0506*** −0.0496*** −0.0505*** −0.0349**
(−3.84) (−3.73) (−3.05) (−3.20) (−3.05) (−2.14)
BDSIZE 0.0015 0.0022* 0.0053*** 0.0041*** 0.0054*** 0.0039**
(1.05) (1.73) (3.63) (2.74) (3.63) (2.44)
PINDDIR −0.0359* −0.0314* −0.0036 −0.0004 −0.0073 −0.0051
(−1.83) (−1.63) (−0.11) (−0.01) (−0.21) (−0.17)
CEODUAL 0.0028 0.0010 0.0027 0.0044 0.0024 0.0047
(0.61) (0.23) (0.40) (0.71) (0.36) (0.77)
CEOAGE 0.0000 0.0002 0.0006 0.0010* 0.0006 0.0010*
(0.02) (0.51) (1.08) (1.77) (1.05) (1.77)
CEOTENURE 0.0000 0.0000 −0.0003 −0.0006 −0.0003 −0.0006
(0.18) (−0.38) (−0.63) (−1.36) (−0.66) (−1.35)
CEOFEMALE 0.0180* −0.0009 0.0254** 0.0064 0.0246** 0.0088
(1.86) (−0.10) (2.17) (0.76) (2.12) (0.90)
CFOAGE −0.0001 0.0000 −0.0008 −0.0009* −0.0008 −0.0007
(−0.20) (−0.09) (−1.57) (−1.85) (−1.45) (−1.47)
CFOFEMALE 0.0145** 0.0144** −0.0011 −0.0007 −0.0012 −0.0005
(2.04) (2.14) (−0.80) (−0.55) (−0.87) (−0.41)
CFOTENURE −0.0005 −0.0002 0.0000 0.0143* 0.0000 0.0170**
(−0.52) (−0.26) (0.00) (1.65) (0.00) (1.96)
Year FE Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes
N 6966 6966 1886 1886 1886 1886
Adj. R2 0.1622 0.2265 0.1429 0.1848 0.1427 0.2143
This table presents the regression results of the tax avoidance (CASH ETR, and CASH ETRLT) on acquisitiveness (ACQPR, ACQNO & ACQVALUE) after
controlling CEO and CFO characteristics and tax controls. All model specifications employ robust standard errors with one-way clustered t-statistics,
which are reported in the parentheses below each coefficient. The superscripts ⁎⁎⁎, ⁎⁎, and ⁎ correspond to statistical significance at the one-, five-,
and ten-percent levels, respectively. See Appendix 1 for the variable definitions.
References
Aktas, N., de Bodt, E., Bollaert, H., Roll, R., 2016. CEO narcissism and the takeover process: from private initiation to deal completion. J. Financ. Quant. Anal. 51 (1),
113–137.
Anderson, R.C., Reeb, D.M., 2003. Founding-family ownership and firm performance: evidence from the S&P 500. J. Financ. 58 (3), 1301–1328.
Andrade, G., Mitchell, M.L., Stafford, E., 2001. New evidence and perspectives on mergers. J. Econ. Perspect. 15, 103–120.
Antoniou, A., Arbour, P., Zhao, H., 2008. How much is too much: are merger premiums too high? Eur. Financ. Manag. 14 (2), 268–287.
Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D., Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance. J. Account. Econ. 60 (1), 1–17.
Auerbach, A.J., Reishus, D., 1987. The impact of taxation on mergers and acquisitions. In: Mergers and Acquisitions. University of Chicago Press, pp. 69–86 NBER
Working Paper.
Baik, B.O.K., Farber, D.B., Lee, S.S., 2011. CEO ability and management earnings forecasts. Contemp. Account. Res. 28 (5), 1645–1668.
Bartlett, A., Preston, D., 2000. Can ethical behaviour really exist in business. J. Bus. Ethics 23 (2), 199–209.
Bertrand, M., Schoar, A., 2003. Managing with style: the effect of managers on firm policies. Q. J. Econ. 118, 1169–1208.
Bharadwaj, A.S., Bharadwaj, S.G., Konsynski, B.R., 1999. Information technology effects on firm performance as measured by Tobin's q. Manag. Sci. 45 (7),
1008–1024.
Blaufus, K., & Zinowsky, T. (2013). Investigating the determinants of experts' tax aggressiveness: experience and personality traits (No. 151). Arqus- Discussion Paper
No. 151 Ideas/RepCO.
Boone, J.P., Khurana, I.K., Raman, K.K., 2012. Religiosity and tax avoidance. The Journal of the American Taxation Association 35 (1), 53–84.
Bradley, M., Desai, A., Kim, E.H., 1988. Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms. J.
Financ. Econ. 21 (1), 3–40.
Bris, A., 2005. Do insider trading laws work? Eur. Financ. Manag. 11 (3), 267–312.
25
Brown, R., Sarma, N., 2007. CEO overconfidence, CEO dominance and corporate acquisitions. J. Econ. Bus. 59 (5), 358–379.
Carpenter, M.A., Geletkanycz, M.A., Sanders, W.G., 2004. Upper echelons research revisited: antecedents, elements, and consequences of top management team
composition. J. Manag. 30 (6), 749–778.
Chan, K.H., Mo, P.L., Zhou, A.Y., 2013. Government ownership, corporate governance and tax aggressiveness: evidence from China. Account. Finance 53 (4),
1029–1051.
Chaney, P.K., Jeter, D.C., Shivakumar, L., 2004. Self-selection of auditors and audit pricing in private firms. The accounting review 79 (1), 51–72.
Chatterjee, A., Hambrick, D.C., 2007. It's all about me: narcissistic chief executive officers and their effects on company strategy and performance. Adm. Sci. Q. 52 (3),
351–386.
Chen, C., 2013. Discussion of ‘Government ownership, corporate governance and tax aggressiveness: evidence from C hina’. Accoun. Fin. 53 (4), 1053–1059.
Chen, T., Lin, C., 2017. Does information asymmetry affect corporate tax aggressiveness? J. Financ. Quant. Anal. 52 (5), 2053–2081.
Chen, S., Chen, X., Cheng, Q., Shevlin, T., 2010. Are family firms more tax aggressive than non-family firms? J. Financ. Econ. 95 (1), 41–61.
Chen, S., Miao, B., Shevlin, T., 2015. A new measure of disclosure quality: the level of disaggregation of accounting data in annual reports. J. Account. Res. 53 (5),
1017–1054.
Chhaochharia, V., Kumar, A., Niessen-Ruenzi, A., 2012. Local investors and corporate governance. J. Account. Econ. 54 (1), 42–67.
Chyz, J.A., 2013. Personally tax aggressive executives and corporate tax sheltering. J. Account. Econ. 56 (2), 311–328.
Chyz, J., F. Gaertner, A. Kausar, and L. Watson. 2015. Overconfidence and Corporate Tax Policy. Working paper, The University of Tennessee, University of Wisconsin,
and Nanyang Technological University.
Cronqvist, H., Makhija, A.K., Yonker, S.E., 2012. Behavioral consistency in corporate finance: CEO personal and corporate leverage. J. Finan. Econ. 103 (1), 20–40.
Datta, S., Iskandar-Datta, M., Raman, K., 2001. Executive compensation and corporate acquisition decisions. J. Financ. 56 (6), 2299–2336.
DeAngelo, L.E., 1981. Auditor size and audit quality. J. Account. Econ. 3, 183–199.
Desai, M.A., 2005. The degradation of reported corporate profits. J. Econ. Perspect. 19 (4), 171–192.
Desai, M.A., Dharmapala, D., 2006. Corporate tax avoidance and high-powered incentives. J. Financ. Econ. 79 (1), 145–179.
Desai, M.A., Dharmapala, D., 2009a. Corporate tax avoidance and firm value. Rev. Econ. Stat. 91 (3), 537–546.
Desai, M., Dharmapala, D., 2009b. Earnings management, corporate tax shelters, and book-tax alignment. Natl. Tax J. 62, 169–186.
Desai, M.A., Dyck, A., Zingales, L., 2007. Theft and taxes. J. Financ. Econ. 84 (3), 591–623.
Donohoe, M.P., Robert Knechel, W., 2014. Does corporate tax aggressiveness influence audit pricing? Contemporary Accounting Research 31 (1), 284–308.
Doukas, J.A., Petmezas, D., 2007. Acquisitions, Overconfident Managers and Self-attribution Bias. Eur. Financ. Manag. 13 (3), 531–577.
Dowling, M., Aribi, Z.A., 2013. Female directors and UK company acquisitiveness. Int. Rev. Financ. Anal. 29, 79–86.
Dyreng, S.D., Hanlon, M., Maydew, E.L., 2008. Long-run corporate tax avoidance. Account. Rev. 83 (1), 61–82.
Dyreng, S.D., Hanlon, M., Maydew, E.L., 2010. The effects of executives on corporate tax avoidance. Account. Rev. 85 (4), 1163–1189.
Fama, E., French, K., 1997. Industry costs of equity. J. Financ. Econ. 43 (2), 153–193.
Finkelstein, S., Hambrick, D.C., Cannella, A., 2009. Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards. Oxford University
Press, New York.
Francis, J.R., Reichelt, K., Wang, D., 2005. The pricing of national and city-specific reputations for industry expertise in the U.S. audit market. Account. Rev. 80 (1),
113–136.
Francis, B.B., Hasan, I., Wu, Q., Yan, M., 2014. Are female CFOs less tax aggressive? Evidence from tax aggressiveness. J. Am. Taxation Assoc. 36 (2), 171–202.
Francis, B.B., Hasan, I., Sun, X., Wu, Q., 2016. CEO political preference and corporate tax sheltering. J. Corp. Finan. 38, 37–53.
Frank, M.M., Lynch, L.J., Rego, S.O., 2009. Tax reporting aggressiveness and its relation to aggressive financial reporting. Account. Rev. 84 (2), 467–496.
Frankel, R., Li, X., 2004. Characteristics of a firm's information environment and the information asymmetry between insiders and outsiders. J. Account. Econ. 37 (2),
229–259.
Fung, S.Y.K., Gul, F., Krishnan, J., 2012. City-level auditor industry specialization, economies of scale, and audit pricing. Account. Rev. 87 (4), 1281–1307.
Graham, J.R., Harvey, C.R., Puri, M., 2013. Managerial attitudes and corporate actions. J. Financ. Econ. 109 (1), 103–121.
Gupta, A., Misra, L., 2007. Deal size, bid premium, and gains in bank mergers: the impact of managerial motivations. Financ. Rev. 42 (3), 373–400.
Hambrick, D.C., Mason, P.A., 1984. Upper echelons: the organization as a reflection of its top managers. Acad. Manag. Rev. 9 (2), 193–206.
Hanlon, M., Heitzman, S., 2010. A review of tax research. J. Account. Econ. 50 (2), 127–178.
Hanlon, M., Slemrod, J., 2009. What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement. J. Public Econ. 93 (1),
126–141.
Hardin, J.W., Schmeidiche, H., Carroll, R.J., 2003. Instrumental variables, bootstrapping, and generalized linear models. Stata J. 3 (4), 351–360.
Heaton, J., 2002. Managerial optimism and corporate finance. Financ. Manag. 31, 33–45.
Heckman, J.J., 1979. Sample Selection Bias as a Specification Error. Econometrica 47, 153–161.
Hermalin, B.E., Weisbach, M.S., 1988. The determinants of board composition. RAND J. Econ. 589–606.
Hermalin, B.E., Weisbach, M.S., 1991. The effects of board composition and direct incentives on firm performance. Financ. Manag. 101–112.
Holthausen, R.W., 1990. Accounting method choice: opportunistic behavior, efficient contracting and information perspectives. J. Account. Econ. 12 (1–3), 207–218.
Hope, O.K., Thomas, W.B., 2008. Managerial empire building and firm disclosure. J. Account. Res. 46 (3), 591–626.
Huang, J., Kisgen, D.J., 2013. Gender and corporate finance: are male executives overconfident relative to female executives? J. Financ. Econ. 108 (3), 822–839.
Hubbard, R.G., Palia, D., 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. J. Financ. Econ. 53 (3),
353–384.
Huseynov, F., Klamm, B.K., 2012. Tax avoidance, tax management and corporate social responsibility. J. Corp. Finan. 18 (4), 804–827.
Jensen, M.C., 1986. Agency cost of free cash flow, corporate finance, and takeovers, corporate finance, and takeovers. Am. Econ. Rev. 76 (2).
Jensen, M.C., Meckling, W.H., 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. J. Financ. Econ. 3 (4), 305–360.
Kanagaretnam, K., Lee, J., Lim, C.Y., Lobo, G.J., 2016. Relation between auditor quality and tax aggressiveness: implications of cross-country institutional differences.
Audit. J. Pract. Theory 35 (4), 105–135.
Kennedy, P., 2008. A Guide to Econometrics, 6th ed. Blackwell Publishing Ltd, Malden, MA.
Kim, J.B., Li, Y., Zhang, L., 2011. Corporate tax avoidance and stock price crash risk: firm-level analysis. J. Financ. Econ. 100 (3), 639–662.
Kim, J.B., Wang, Z., Zhang, L., 2016. CEO overconfidence and stock price crash risk. Contemporary Accounting Research 33 (4), 1720–1749.
King, M.R., 2009. Prebid run-ups ahead of Canadian takeovers: how big is the problem? Financ. Manag. 38 (4), 699–726.
Klassen, K.J., Lisowsky, P., Mescall, D., 2015. The role of auditors, non-auditors, and internal tax departments in corporate tax aggressiveness. Account. Rev. 91 (1),
179–205.
Kwak, B., Ro, B.T., Suk, I., 2012. The composition of top management with general counsel and voluntary information disclosure. J. Account. Econ. 54 (1), 19–41.
Lang, M., Lundholm, R., 2000. Voluntary disclosure and equity offering: reducing information asymmetry or hyping the stock? Contemp. Account. Res. 17 (4),
623–662.
Lanis, R., Richardson, G., 2011. The effect of board of director composition on corporate tax aggressiveness. J. Account. Public Policy 30 (1), 50–70.
Lanis, R., Richardson, G., 2012. Corporate social responsibility and tax aggressiveness: an empirical analysis. J. Account. Public Policy 31 (1), 86–108.
Lennox, C., Lisowsky, P., Pittman, J., 2013. Tax aggressiveness and accounting fraud. J. Account. Res. 51 (4), 739–778.
Leuz, C., Verrecchia, R.E., 2000. The economic consequences of increased disclosure. J. Account. Res. 91–124.
Levi, M., Li, K., Zhang, F., 2014. Director gender and mergers and acquisitions. J. Corp. Finan. 28, 185–200.
Lisowsky, P., Robinson, L., Schmidt, A., 2013. Do publicly disclosed tax reserves tell us about privately disclosed tax shelter activity? J. Account. Res. 51 (3), 583–629.
Loughran, T., McDonald, B., 2014. Measuring readability in financial disclosures. J. Financ. 69 (4), 1643–1671.
Mace, M.L., 1986. Directors: Myth and Reality. Harvard Business School Press, Boston, MA.
26
Malatesta, P.H., 1983. The wealth effect of merger activity and the objective functions of merging firms. J. Financ. Econ. 11 (1–4), 155–181.
Malmendier, U., Tate, G., 2008. Who makes acquisitions? CEO overconfidence and the market's reaction. J. Financ. Econ. 89 (1), 20–43.
Markov, S., Tamayo, A., 2006. Predictability in financial analyst forecast errors: learning or irrationality? J. Account. Res. 44 (4), 725–761.
Masulis, R.W., Wang, C., Xie, F., 2007. Corporate governance and acquirer returns. J. Financ. 62 (4), 1851–1889.
McGuire, S.T., Omer, T.C., Wang, D., 2012. Tax avoidance: Does tax-specific industry expertise make a difference? The Accounting Review 87 (3), 975–1003.
Mills, L.F., Kaye, J.N., Garth, N., 2003. Reducing error in measures of corporate tax incentives. J. Am. Taxation Assoc. 25 (2), 1–17.
Minnick, K., Noga, T., 2010. Do corporate governance characteristics influence tax management? J. Corp. Finan. 16 (5), 703–718.
Moeller, S.B., Schlingemann, F.P., Stulz, R.M., 2005. Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. J. Financ. 60
(2), 757–782.
Nielsen, S., 2010. Top management team diversity: a review of theories and methodologies. Int. J. Manag. Rev. 12 (3), 301–316.
Olsen, K.J., Stekelberg, J., 2016. CEO narcissism and corporate tax sheltering. J. Am. Taxation Assoc. 38 (1), 1–22.
Petersen, M.A., 2009. Estimating standard errors in finance panel data sets: comparing approaches. Rev. Financ. Stud. 22 (1), 435–480.
Phillips, J.D., 2003. Corporate tax-planning effectiveness: the role of compensation-based incentives. Account. Rev. 78 (3), 847–874.
Rego, S.O., 2003. Tax-avoidance activities of US multinational corporations. Contemp. Account. Res. 20 (4), 805–833.
Rego, S.O., Wilson, R., 2012. Equity risk incentives and corporate tax aggressiveness. J. Account. Res. 50 (3), 775–810.
Richardson, G., Taylor, G., Lanis, R., 2013. The impact of board of director oversight characteristics on corporate tax aggressiveness: an empirical analysis. J. Account.
Public Policy 32 (3), 68–88.
Robinson, J., Sikes, S., Weaver, C., 2010. The impact of evaluating the tax department as a profit center on effective tax rates. Account. Rev. 85 (3), 1035–1064.
Seth, A., 1990. Value creation in acquisitions: a re-examination of performance issues. Strateg. Manag. J. 11 (2), 99–115.
Shen, R., Tang, Y., Chen, G., 2014. When the role fits: how firm status differentials affect corporate takeovers. Strateg. Manag. J. 35 (13), 2012–2030.
Sims, T.S., Sunley, E.M., Scholes, M.S., Wolfson, M.A., 1992. Taxes and Business Strategy: A Planning Approach. Prentice Hall, Englewood Cliffs, N.J.
Stulz, R., 1990. Managerial discretion and optimal financing policies. J. Financ. Econ. 26 (1), 3–27.
Sudarsanam, S., Mahate, A.A., 2006. Are friendly acquisitions too bad for shareholders and managers? Long-term value creation and top management turnover in
hostile and friendly acquirers. Br. J. Manag. 17 (S1), S7–S30.
Wilson, R.J., 2009. An examination of corporate tax shelter participants. Account. Rev. 84 (3), 969–999.
Yim, S., 2013. The acquisitiveness of youth: CEO age and acquisition behavior. J. Financ. Econ. 108 (1), 250–273.
27
View publication stats

2020 - Managerial Acquisitiveness and Corporate Tax Avoidance

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2020 - Managerial Acquisitiveness and Corporate Tax Avoidance

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Managerial acquisitiveness and corporate tax avoidance

Article in Pacific-Basin Finance Journal · August 2018

Mehdi Khedmati Syed Shams

SEE PROFILE SEE PROFILE

The user has requested enhancement of the downloaded file.

Contents lists available at ScienceDirect

Pacific-Basin Finance Journal

Managerial acquisitiveness and corporate tax avoidance

ARTICLE INFO ABSTRACT

E-mail addresses: ferdinand.gul@deakin.edu.au (F.A. Gul), Mehdi.Khedmati@monash.edu (M. Khedmati),

2. Literature review and hypothesis development

3.1. Measures of tax avoidance

3.2. Measures of managerial acquisitiveness

3.3. Multivariate model

TAXAVOIDANCEit = 0 + 1 ACQit + i CONTROLSit + i INDit + i YEARit + it (1)

4. Sample selection and descriptive statistics

4.1. Data and sample selection

Less firm-years with missing accounting data (213,505)

Panel B: Industry distribution

4.2. Descriptive statistics

Variable N Mean Median Q1 Q3 Std dev

CASH-ETR 48,139 0.2634 0.2617 0.1483 0.3569 0.1607

5.1. Managerial acquisitiveness and tax avoidance (H1)

5.1.1. Cross-sectional regression analysis

ACQPR ACQNO ACQVALUE

Intercept 0.2644 ⁎⁎⁎

Variable ACQPR ACQNO ACQVALUE

Intercept 0.3062⁎⁎⁎ 0.2995⁎⁎⁎ 0.2737⁎⁎⁎ 0.2561⁎⁎⁎ 0.2833⁎⁎⁎ 0.2350⁎⁎⁎

Variable ACQPR ACQNO ACQVALUE

LOSS −0.0002 0.0009 0.0069 0.0061 0.0072 0.0067

5.2. Endogeneity test

5.2.1. Propensity score matching analysis

Intercept 0.1930⁎⁎⁎ 0.2632⁎⁎⁎ 0.1866⁎⁎⁎ 0.2843⁎⁎⁎ 0.2016⁎⁎⁎ 0.2951⁎⁎⁎

5.2.2. Heckman test

Intercept 0.2630⁎⁎⁎ 0.2438⁎⁎⁎ 0.2051⁎⁎⁎ 0.2646⁎⁎⁎ 0.2501⁎⁎⁎ 0.2470⁎⁎⁎

5.3. Managerial acquisitiveness and tax avoidance (H2)

Variable First Stage Second stage First Stage Second stage

Intercept −2.4622 ⁎⁎⁎

5.3.1. The role of audit quality

5.3.2. CEO equity based compensation

Variable ACQNO ACQVALUE

CASH ETR CASH ETRLT CASH ETR CASH ETRLT

Panel B: City-level auditor industry specialization

CASH ETR CASH ETRLT CASH ETR CASH ETRLT

(continued on next page)

Panel C: Individual BIGN auditor

Deloitte Ernst and Young

ACQNO ACQVALUE ACQNO ACQVALUE

⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎ ⁎⁎⁎

Price waterhouse Coopers KPMG

ACQNO ACQVALUE ACQNO ACQVALUE

Variable CASH ETR CASH ETRLT CASH ETR CASH ETRLT

Intercept 0.2816⁎⁎⁎ 0.2809⁎⁎⁎ 0.3760⁎⁎⁎ 0.2780⁎⁎⁎

5.3.3. Stock market based M&A performance

5.3.4. CEO overconfidence

5.4. Managerial acquisitiveness, tax avoidance and firm performance

Variable CASH ETR CASH ETRLT CASH ETR CASH ETRLT

Intercept 0.2941⁎⁎⁎ 0.2852⁎⁎⁎ 0.2931⁎⁎⁎ 0.2864⁎⁎⁎

5.5. Additional tests

Variable CASH ETR CASH ETRLT CASH ETR CASH ETRLT

Intercept 0.3197 ⁎⁎⁎

Panel B: Subsample analysis based on overconfident CEOs

Intercept 0.3528* 0.3243* 0.2791* 0.2528* 0.2839* 0.1890*

LEV −0.0750* −0.0735* −0.0846* −0.0928* −0.0796* −0.0935*