Top Management Conservatism and Corporate Risk Strategies: Evidence from Managers' Personal Political Orientation and Corporate Tax Avoidance

Strategic Management Journal, Vol. 36, No. 12, 2015

Posted: 19 Oct 2014 Last revised: 5 Mar 2016

See all articles by Dane M. Christensen

Dane M. Christensen

University of Oregon

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Steven Boivie

Texas A&M University - Department of Management

Scott D. Graffin

University of Georgia - Department of Management

Date Written: September 20, 2014

Abstract

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.

Suggested Citation

Christensen, Dane M. and Dhaliwal, Dan S. and Boivie, Steven and Graffin, Scott D., Top Management Conservatism and Corporate Risk Strategies: Evidence from Managers' Personal Political Orientation and Corporate Tax Avoidance (September 20, 2014). Strategic Management Journal, Vol. 36, No. 12, 2015, Available at SSRN: https://ssrn.com/abstract=2498918

Dane M. Christensen (Contact Author)

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Steven Boivie

Texas A&M University - Department of Management ( email )

430 Wehner
College Station, TX 77843-4218
United States

Scott D. Graffin

University of Georgia - Department of Management ( email )

United States

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