Does the Ability of Managers Affect the Frim's Tax Avoidance?

Abstract

This study performs an empirical analysis on the relation of managerial ability and tax avoidance level. Managerial ability is defined as the residual of a regression which excludes firm specific properties from a efficiency score that is produced by a Data Envelopment Analysis. The results of the analyses indicate that there is a negative and statistically significant relationship between managerial ability and tax avoidance. This shows that high ability managers do not engage in excessive tax avoidance. This study will help extend future research on managerial ability by analyzing the relation between tax avoidance managerial ability.