The impact of corporate governance on tax planning: an institutional theory perspective
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Bibliographic record
Abstract
Purpose This paper aims to examine the impact of corporate governance on tax planning for UK firms in an institutional theory framework. The paper categorizes governance into coercive, normative and mimetic forces and investigates how these forces influence tax planning activities. The paper further explores the interaction between these forces and the strength of internal governance in their relation to tax planning. Design/methodology/approach The paper uses a manually collected data set comprising 1,236 firm-year observations from UK firms. Governance factors are classified according to institutional theory, with coercive forces represented by auditor-provided tax services and institutional ownership, normative forces by the professional accountancy qualifications of the board and mimetic forces by tax affiliations and the tax experience of the board. For the main analysis, the authors use ordinary least squares (OLS) regression with robust standard errors to examine the impact of governance factors on tax planning. In further analysis, the authors conduct a two-stage least squares (2SLS) to address potential endogeneity concerns and validate the robustness of the findings. Findings The paper finds that while coercive forces are negatively associated with tax planning, the mimetic forces have a positive impact. In a further analysis, the authors find that auditor-provided tax services reduce tax planning only in firms with weak internal governance, suggesting these services help in mitigating weak governance. Inversely, professional accountancy qualifications reduce tax planning in firms with strong internal governance, indicating a complementary effect. Tax affiliations significantly influence tax planning in strongly governed firms, whereas tax experience is more relevant in weakly governed firms. Originality/value The findings enrich the applicability of institutional theory within the context of tax planning, demonstrating how the impact of governance forces varies based on the strength of internal governance within firms. The paper makes regulatory recommendations for the involvement of auditors in tax planning services to supplement weak internal governance and use of the board tax characteristics to shortlist firms for further tax audits; and a recommendation for management to have tax affiliates (tax experience) on the board, which may bring tax savings in a strongly (weakly) governed environment.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.001 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it