Overconfidence, CEO Awards, and Corporate Tax Aggressiveness | Zendy

Kubick Thomas R. | Zendy; Lockhart G. Brandon | Zendy

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Overconfidence, CEO Awards, and Corporate Tax Aggressiveness

Author(s) -

Kubick Thomas R.,

Lockhart G. Brandon

Publication year - 2017

Publication title -

journal of business finance and accounting

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.282

H-Index - 77

eISSN - 1468-5957

pISSN - 0306-686X

DOI - 10.1111/jbfa.12237

Subject(s) - overconfidence effect , propensity score matching , matching (statistics) , accounting , monetary economics , economics , corporate tax , business , psychology , tax avoidance , public economics , tax credit , social psychology , statistics , mathematics

Theory and prior research suggest that overconfidence leads managers to overestimate their own ability to generate returns, leading to riskier corporate policies. We use a novel dataset of media awards as an exogenous shock to overconfidence to test whether award‐winning CEOs adopt more aggressive corporate tax policies. Using propensity score matching and a difference‐in‐difference design, we find strong evidence that firms with an award‐winning CEO exhibit significantly greater tax aggressiveness following the award. Overall, our results suggest that CEO overconfidence has a meaningful impact on corporate tax policy.

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