Relationship between executive variable compensation and tax aggressiveness: The moderating role of national culture

Objective: To assess the moderating role of national culture in the relationship between executive variable compensation and tax avoidance. Method: The study population comprised non-financial firms listed on stock exchanges in G-20 countries. The sample consisted of 29,148 firms and 80,891 observations covering the period from 2013 to 2021. Abnormal Book-Tax Differences (ABTD) were used as a proxy for tax avoidance. Data were collected from the Refinitiv Eikon® database, and the analysis was conducted using multiple linear regression, with coefficients estimated through the Ordinary Least Squares (OLS) method. Results: Executive variable compensation is positively associated with tax avoidance. Regarding the moderating effect of national culture dimensions, the findings suggest that the positive relationship between executive variable compensation and tax avoidance is stronger in countries with high levels of individualism, masculinity, and indulgence, and weaker in countries with high power distance, uncertainty avoidance, and long-term orientation. Contributions: The study provides insights for society, executives, and shareholders, offering empirical evidence that may assist in designing more effective compensation schemes to align managerial actions with shareholder interests in corporate taxation strategies.