Managerial ability and tax avoidance: evidence from Korea

Abstract

This study investigates the incremental effects of managerial ability on tax avoidance. Managerial ability is estimated through a data envelopment analysis (DEA) and tobit regressions. We find that there is a negative relationship between tax avoidance and firm value. In addition, we document a statistically meaningful negative relation between managerial ability and tax avoidance. The results also suggest that high managerial ability mitigates the negative relationship between tax avoidance and firm value. These findings suggest that managerial ability influences the tax avoidance behavior of the firm.