Corporate Governance and Tax Avoidance: Evidence from Greek Service-Sector Firms

This study investigates the relationship between corporate governance mechanisms and tax avoidance in Greek service-sector firms over the period 2014–2023. Using panel data, the analysis evaluates the influence of board characteristics, audit committees, auditor quality, and ownership structures on firms’ tax behavior. The results reveal that traditional governance mechanisms—such as board size, independence, audit committee composition, and gender diversity—do not significantly constrain tax avoidance, reflecting the formalistic rather than substantive adoption of governance practices in Greece. In contrast, external audit quality and ownership structure emerge as critical determinants. Engagement with high-quality auditors, particularly Big 4 firms, is associated with reduced tax aggressiveness, while state ownership similarly curbs avoidance, consistent with reputational and political accountability incentives. Conversely, managerial and foreign ownership are positively related to aggressive tax planning. The findings underscore the contextual nature of governance effectiveness: in weak enforcement environments, formal mechanisms serve largely symbolic roles, whereas external oversight and ownership incentives carry greater weight. This study contributes to agency and institutional theory by highlighting the limits of formal governance reforms absent substantive independence and enforcement.