Top management conservatism and corporate risk strategies: Evidence from managers' personal political orientation and corporate tax avoidance

Dane M. Christensen, Dan S. Dhaliwal, Steven Boivie, Scott D. Graffin

Research output: Contribution to journalArticle

72 Scopus citations

Abstract

We investigate whether managers' personal political orientation helps explain tax avoidance at the firms they manage. Results reveal the intriguing finding that, on average, firms with top executives who lean toward the Republican Party actually engage in less tax avoidance than firms whose executives lean toward the Democratic Party. We also examine changes in tax avoidance around CEO turnovers and find corroborating evidence. Additionally, we find that political orientation is helpful in explaining top management team composition and CEO succession. Our paper extends theory and research by (1) illustrating how tax avoidance can serve as another measure of corporate risk taking and (2) using political orientation as a proxy for managerial conservatism, which is an ex ante measure of a manager's propensity toward risk.

Original languageEnglish (US)
Pages (from-to)1918-1938
Number of pages21
JournalStrategic Management Journal
Volume36
Issue number12
DOIs
StatePublished - Dec 2015

Keywords

  • CEO/TMT decision making
  • political orientation
  • risk
  • tax avoidance
  • upper echelons

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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