Tax aggressiveness and CEO overconfidence in the stock market: Evidence from Brazil


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This study examines the association between tax aggressiveness and overconfidence in 277 Brazilian stock market listed companies from 2010 to 2017, with the supposition (based on optimal capital ownership structure theory) that the greater a manager’s overconfidence, the more aggressive the company’s tax decisions. Overconfidence is measured in an innovative way in which normalizing excess acquisitions and excess investments using the company’s market value and then combining these two variables with indebtedness to capture, more directly, the possible effects of overconfidence on the corporation’s operations. Tax aggressiveness is computed using a tax burden on earnings and value-added. The variables included in the model were obtained from data contained in the selected companies’ financial statements. Data analysis was performed by multiple linear regression. The parameters used combined and fixed effects methods to identify an association between tax aggressiveness and overconfidence. Data related to corporate governance, CEO’s characteristics, and capital concentration were used as control variables. The study’s main finding does not show any significant relationship between fiscal aggressiveness and overconfidence; however, they did show a significant association with tax aggressiveness, the company’s size, the return on shares, and the education level of the CEO. An interesting finding of the robustness tests is the stationarity of tax aggressiveness, which could partially explain the non-significance of the main finding.

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    • Table 1. Model variables
    • Table 2. Descriptive statistics
    • Table 3. Statistics of variables used in the robustness tests
    • Table 4. Correlation matrix
    • Table 5. Tax aggressiveness and overconfidence
    • Table 6. Personal characteristics
    • Table 7. Corporate governance
    • Table 8. Duality and turnover
    • Table 9. Stationarity
    • Conceptualization
      Giovana Carrer, Tiago Slavov
    • Data curation
      Giovana Carrer, Tiago Slavov
    • Formal Analysis
      Giovana Carrer, Tiago Slavov
    • Investigation
      Giovana Carrer, Tiago Slavov
    • Methodology
      Giovana Carrer, Tiago Slavov
    • Project administration
      Giovana Carrer
    • Resources
      Giovana Carrer
    • Software
      Giovana Carrer
    • Validation
      Giovana Carrer, Tiago Slavov
    • Visualization
      Giovana Carrer, Tiago Slavov
    • Writing – original draft
      Giovana Carrer
    • Writing – review & editing
      Giovana Carrer, Tiago Slavov
    • Supervision
      Tiago Slavov