The Impact of Board Characteristics on Tax Avoidance: Do Industry Regulations Matter?

Abstract

This paper examines the effect of board characteristics on tax avoidance and the moderating role of industry regulation on this effect. Using a comprehensive panel of 84,153 firm-year observations from 39 countries during the period of 2000–2023, we illustrate that larger boards, higher female representation, significant foreign ownership, and the presence of independent directors are generally associated with higher effective tax rates, suggesting lower levels of tax avoidance. This study further demonstrates that the effects of board gender diversity and board independence are more pronounced in regulated industries, where stringent governance and ethical standards prevail, emphasizing the importance of regulatory oversight in mitigating aggressive tax planning. These findings are crucial for policymakers, regulators, and corporate governance practitioners aiming to align corporate practices with ethical standards and reduce the risks associated with tax avoidance.