An Empirical Study of the Impact of Board of Director Composition on Corporate Tax Aggressiveness

Our study empirically tests whether board of director composition impacts on corporate tax aggressiveness. We collect a unique sample of 16 Australian tax aggressive corporations that have been accused of undertaking tax aggressive activities by the Australian Tax Office during the period 2001-2006. Thereafter, we match these 16 tax aggressive corporations with 16 non-tax aggressive corporations (based on industry classification, corporation size and time period). This procedure generates a choice-based sample of 32 corporations for empirical analysis. Our logit regression results show that by including a higher proportion of outside members on the board of directors, this reduces the likelihood of tax aggressiveness. Moreover, we find that the existence of an audit committee does not significantly affect the possibility of tax aggressiveness. Finally, our additional logit regression results indicate that as the average number of directorships held by outside directors in other corporations increases, this decreases the likelihood of tax aggressiveness.