Voluntary disclosure, tax avoidance and family firms

in Journal of Management and Governance (2021)

This study examines the effect of voluntary disclosure in annual reports on tax avoidance activities. The agency theory of tax avoidance suggests that tax sheltering is associated with important agency ... [more ▼]

This study examines the effect of voluntary disclosure in annual reports on tax avoidance activities. The agency theory of tax avoidance suggests that tax sheltering is associated with important agency costs, underlining the importance of corporate governance mechanisms such as voluntary disclosure in shaping tax planning. Using a sample of 3448 firm-year observations of French listed firms over 2007–2013, the results show that voluntary disclosure is associated with lower tax avoidance activities, providing evidence that this disclosure can be seen as an effective monitoring tool that reduces the insiders’ likelihood to engage in rent extraction through tax avoidance activities. The results also indicate that the negative effect of voluntary disclosure on tax avoidance is significant only when family control is below 40%, suggesting that the disciplinary role of voluntary disclosure is limited to firms with relatively low family control levels. Overall, our findings are consistent with the agency theory of tax avoidance and highlight the important role of corporate disclosure in improving corporate governance. [less ▲]

Does the board of directors affect cash holdings? A study of French listed firms

in Journal of Management and Governance (2015), 19(2), 341-370

Prior studies show that agency conflicts are important in explaining corporate financial policies and that the board of directors is central to corporate governance. In this study, we examine the role of ... [more ▼]

Prior studies show that agency conflicts are important in explaining corporate financial policies and that the board of directors is central to corporate governance. In this study, we examine the role of this governing body in the accumulation of cash reserves. Using a sample of 597 French listed firms during 2001–2007, we find that firms with boards deemed to be effective in mitigating agency problems—that is, those appointing independent directors and splitting chief executive officer and chair positions—accumulate less cash reserves than those with less effective boards. Moreover, two-tier boards are more efficient in mitigating the agency costs of free cash flow, leading to less corporate cash hoarding. These findings support the idea that agency conflicts influence cash management policy and that effective boards of directors play an important disciplinary role in a concentrated ownership setting. [less ▲]