Top management conservatism and corporate risk strategies: Evidence from managers' personal political orientation and corporate tax avoidance
Article first published online: 20 SEP 2014
Copyright © 2014 John Wiley & Sons, Ltd.
Strategic Management Journal
How to Cite
Christensen, D. M., Dhaliwal, D. S., Boivie, S. and Graffin, S. D. (2014), Top management conservatism and corporate risk strategies: Evidence from managers' personal political orientation and corporate tax avoidance. Strat. Mgmt. J.. doi: 10.1002/smj.2313
- Article first published online: 20 SEP 2014
- Accepted manuscript online: 15 JUL 2014 06:23AM EST
- Manuscript Accepted: 21 JUN 2014
- Manuscript Revised: 21 APR 2014
- Manuscript Received: 10 JUL 2013
- upper echelons;
- political orientation;
- tax avoidance;
- CEO/TMT decision making
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. Copyright © 2014 John Wiley & Sons, Ltd.