CEO overconfidence and tax avoidance: role of institutional and family ownership

Abstract

Purpose

This study aims to investigate the effect of overconfident chief executive officers (CEOs) on corporate tax avoidance and whether this relationship is affected by institutional and family ownership.

Design/methodology/approach

Using a sample of French-listed firms from 2009 to 2021, the authors find that firms managed by overconfident CEOs engage in more tax avoidance practice.

Findings

The authors further find that institutions and families are likely to discourage tax avoidance practices, paying close attention to their long-term horizons and reputational concerns. Overall, the authors' findings shed light on the monitoring role of institutional and family shareholders in restraining the effect of CEO behavioral bias on companies' tax avoidance.

Originality/value

To the authors' knowledge, no study has investigated the impact of managerial overconfidence on the tax behavior of French firms. The authors also extend the growing literature regarding managerial effects by providing new evidence that French firms held by concentrated institutional and family ownership curtail CEO overconfidence behavior toward corporate tax avoidance practices.

Citation

Souguir, Z., Lassoued, N. and Bouzgarrou, H. (2024), "CEO overconfidence and tax avoidance: role of institutional and family ownership", International Journal of Managerial Finance, Vol. 20 No. 3, pp. 768-793. https://doi.org/10.1108/IJMF-12-2022-0545