CEO Tenure and Corporate Tax Avoidance

ABSTRACT We investigate how corporate tax decisions evolve over a CEO's tenure. We hypothesize that because new CEOs have stronger incentives to boost current performance to secure their employment, CEOs may avoid more taxes in their early years of service than they do in later years. Consistent with this career concerns hypothesis, we document that newly hired CEOs engage in a higher level of tax avoidance after controlling for firm fixed effects. We also find that new CEOs avoid more taxes when they face higher employment risk. Additional analyses reveal that new CEOs avoid taxes by deferring domestic income taxes and claiming more uncertain tax deductions. Together, our findings are consistent with career concerns providing strong incentives for managers to defer tax payments.