Effect of Tax Avoidance on Managerial Empire Building: The role of Monitoring Mechanisms and CEO Overconfidence

Articles in Press

Document Type : Research Paper

Authors

1 Ph.D Student, Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Assistant Professor, Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

10.22103/jak.2025.24144.4105

Abstract

Purpose: The main purpose of this research is to investigate the effect of tax avoidance on the construction of a managerial empire with regard to the role of supervisory mechanisms and overconfidence of the CEO.

Sampling method: The statistical population of this research is the companies accepted in the Tehran Stock Exchange and its statistical sample includes the data of 105 companies for the 9-year period of 1393-1401. The sampling method was the systematic elimination method. In this research, multiple regression models were used to analyze the data and test the hypotheses using the mixed data method.

Findings: The findings of the research showed that tax avoidance has a positive effect on building a managerial empire, and regulatory mechanisms weaken this effect. It was also found that the CEO's overconfidence strengthens the effect of tax avoidance on managerial empire building.

Conclusion: through the separation of ownership from control, profit-seeking managers have more opportunities to secure their interests through tax avoidance methods instead of increasing shareholders' wealth; They can also use the tax savings from their overconfidence to build an empire. In the meantime, institutional investors as one of the effective monitoring mechanisms can reduce the opportunities of using tax avoidance strategies by managers in order to gain personal benefits to build a managerial empire.

Keywords

Main Subjects

Journal of Accounting Knowledge

Articles in Press, Accepted Manuscript
Available Online from 11 February 2025

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History

  • Receive Date: 18 October 2024
  • Revise Date: 25 January 2025
  • Accept Date: 11 February 2025

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