Table six presents the regression results of hypothesis one and five, where panel A employs equation one and panel B equation two. In panel A, the family firm indicator is coded as one if a family’s ultimate ownership is larger than fifty percent and zero otherwise, while panel B employs the continuous variable of family ownership. Based on our hypothesis development, we expect the family variables to have positive values on ETR and cash ETR, and negative values on book-tax difference and residual book-tax difference, which would be consistent with private family firms being less tax aggressive than their counterparts.
Panel A displays marginal and inconsistent coefficients for the family firm variable. The coefficients of ETR and residual book-tax suggest that private family firms are slightly more tax aggressive than non-family firms. However, the coefficients of cash ETR and book-tax difference contradicts this indication.
Moreover, none of the coefficients are statistically significant, suggesting that there are no systematic differences between private family- and non-family firms.
In panel B, all the coefficients of family ownership have the expected signs except for the effect on residual book-tax, although marginal and statistically
insignificant. In total, the reported effects of family ownership in table six
suggests that there are no systematic differences between private family- and non-family firms, thereby rejecting hypothesis one.
Regarding the gender effect of the CEO, panel A and B indicate that private family firms increase tax aggressiveness when the CEO is male compared to female. However, the coefficients for the interaction terms are only significant for book-tax differences, although the tendency is supported by the other measures.
Note that the imbalance between male and female CEOs reduces the validity of the analysis. Concluding, we find that the table provides weak evidence that
51 family firms are more tax aggressive when the CEO is male, thereby confirming hypothesis four.
The indications found from testing hypothesis one are contrary to our expectations and the findings of Steijvers and Niskanen (2011, 2014). It can be noted that previous literature (e.g. Chen et al., 2010) recognizes that using a continuous ownership variable implies a linear relationship between tax aggressiveness and family ownership. The lack of such a relation will constitute a bias from obtaining results (Chen et al., 2010), which might affect panel B of table six and seven. We will therefore analyse whether there exists a nonlinear relationship between family ownership and tax aggressiveness in section 6.1.
52
Table 6 Regression on private family firm’s tax aggressiveness
Variables included: Return on assets (ROA) winsorized at 1% level, Leverage (LEV) winsorized at 1% level, Property, plant and equipment (PPE) winsorized at 1% level, Intangiable assets (INTANG) winsorized at 1% level, Equity income (EQINC) winsorized at 1% level, Size (natural logarithm of total assets), BIG4 (indicator variable for BIG4 auditor), CEO gender, Industry fixed effects, Year fixed effects and Company specific fixed effects. An interaction term between CEO gender and family firm and family ownership is included in panel A and B respectively.
Panel A: Private firms (Family firm indicated by indicator variable)
ETR Cash ETR Book-Tax difference DD Book-Tax difference
Family Firm (50%) -0.001 0.000 -0.003 0.000
(-0.34) (0.38) (-1.22) (0.49)
CEO gender 0.004 -0.000 -0.002 -0.000*
(1.40) (-0.56) (-0.90) (-2.03)
Family Dummy (50%) * CEO gender -0.002 -0.001 0.007** 0.000
(-0.68) (-1.52) (2.63) (0.19)
Year fixed effects Yes Yes Yes Yes
Company specific fixed effects Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes
Within R-squared 0.030 0.475 0.221 0.000
N 579249 579249 579249 579249
* p<0.05, ** p<0.01, *** p<0.001 T-values presented in parentheses.
Dependent variables
ETR Cash ETR Book-Tax difference DD Book-Tax difference
Famliy ownership 0.000 0.000 -0.000 0.000
(0.57) (1.35) (-1.21) (0.64)
CEO gender 0.004 -0.001 -0.004 -0.000
(1.03) (-0.93) (-1.11) (-1.86)
Family ownership * CEO gender -0.000 -0.000 0.000* 0.000
(-0.41) (-0.30) (2.00) (1.25)
Year fixed effects Yes Yes Yes Yes
Company specific fixed effects Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes
Within R-squared 0.030 0.475 0.221 0.000
N 579249 579249 579249 579249
* p<0.05, ** p<0.01, *** p<0.001 T-values presented in parentheses.
Panel B: Private firms (Family firm ownership as a contineous variable)
Dependent variables
53 The results from investigating hypothesis two and five are presented in table seven. Panel A employs the family firm indicator variable, now with the threshold of 10 percent, while Panel B employs the continuous family ownership variable.
Regarding hypothesis two, our expectations are equal to those for hypothesis one, namely positive coefficients for the family variables on ETR and cash ETR, and negative effects on book-tax difference and residual book-tax difference. Panel A provides consistent, but statistically insignificant coefficients signalling that public family firms might be less tax aggressive than public non-family firms.
Panel B provides support to the observed tendency, with a statistically significant effect on book-tax. Considering both panels, we find evidence that suggests increased family ownership in public firms reduces tax aggressiveness, but that there is no systematic difference between public family firms and their
counterparts. The findings are therefore partly consistent with the results of Chen et al. (2010) in that family ownership decreases tax aggressiveness, although we are not able to confirm hypothesis two.
Further, the table provides support to the hypothesis that public family firms are more tax aggressive when the CEO is male. Panel A displays a statistically significant effect of the interaction term on the book-tax measure, which is supported by the effect on ETR and book-tax measure in panel B. However, the issues related to the underrepresentation of female CEOs are present also in this analysis. Our conclusion regarding hypothesis five is therefore similar to that of hypothesis two, in that the table provides evidence that public family firms are more tax aggressive when the CEO is male compared to female but might be affected by an imbalanced sample.
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Panel A: Listed firms (Family firm indicated by indicator variable)
ETR Cash ETR Book-Tax difference DD Book-Tax difference
Family Firm (10%) 0.144 0.007 -0.121 -0.000
(1.54) (1.18) (-1.87) (-0.08)
CEO gender -0.219* -0.001 0.217* 0.000*
(-2.07) (-0.15) (2.54) (2.35)
Family Dummy (10%) * CEO gender -0.165 -0.010 0.162* -0.000
(-1.77) (-1.88) (2.45) (-0.39)
Year fixed effects Yes Yes Yes Yes
Company specific fixed effects Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes
Within R-squared 0.297 0.344 0.674 0.368
N 414 414 414 414
* p<0.05, ** p<0.01, *** p<0.001 T-values presented in parentheses.
Dependent variables
Panel B: Listed firms (Family firm ownership as a contineous variable)
ETR Cash ETR Book-Tax difference DD Book-Tax difference
Family ownership 0.012 0.000 -0.009* 0.000
(1.87) (0.51) (-2.04) (0.03)
CEO gender -0.143 -0.001 0.166* 0.000
(-1.44) (-0.17) (2.03) (1.34)
Family ownership * CEO gender -0.014* -0.000 0.011* 0.000
(-2.36) (-1.09) (2.52) (0.85)
Year fixed effects Yes Yes Yes Yes
Company specific fixed effects Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes
Within R-squared 0.300 0.344 0.674 0.378
N 414 414 414 414
* p<0.05, ** p<0.01, *** p<0.001 T-values presented in parentheses.
Dependent variables
Table 7 Regression on public family firm’s tax aggressiveness
Variables included: Return on assets (ROA) winsorized at 1% level, Leverage (LEV) winsorized at 1% level, Property, plant and equipment (PPE) winsorized at 1% level, Intangiable assets (INTANG) winsorized at 1% level, Equity income (EQINC) winsorized at 1% level, Size (natural logarithm of total assets), BIG4 (indicator variable for BIG4 auditor), Industry fixed effects, Year fixed effects and Company specific fixed effects.
In panel A and B, CEO gender and an interaction term between gender and family firm is included.
55 Lastly, table eight presents the results from running equation six which analyses hypothesis three. The estimated effects of the interaction term between family ownership and listing status are all statistically insignificant and somewhat inconsistent. The reported coefficients therefore indicate that there are no systematic differences between listed- and private family firms, rejecting our hypothesis.
Table 8 Regression on family firms listing status
Variables included: Return on assets (ROA) winsorized at 1% level, Leverage (LEV) winsorized at 1% level, Property, plant and equipment (PPE) winsorized at 1% level, Intangiable assets (INTANG) winsorized at 1% level, Equity income (EQINC) winsorized at 1% level, Size (natural logarithm of total assets), BIG4 (indicator variable for BIG4 auditor), Industry fixed effects, Year fixed effects and Company specific fixed effects. Further, listing status, family ownership, an interaction variable between family ownership and listing status, CEO gender and an interaction term between family ownership and CEO gender are included.
ETR Cash ETR Book-Tax difference DD Book-Tax difference
Listing status 0.062 0.003 -0.026 -0.000
(0.80) (0.26) (-0.57) (-0.50)
Famliy ownership 0.000 0.000 -0.000 0.000
(0.81) (1.95) (-1.56) (0.49)
Family ownership * Listing status 0.001 0.000 0.000 0.000
(0.35) (0.67) (0.36) (0.25)
CEO gender 0.005 -0.001 -0.004 -0.000
(1.18) (-0.41) (-1.16) (-1.80)
Family ownership * CEO gender -0.000 -0.000 0.000* 0.000
(-0.55) (-0.66) (2.00) (1.26)
Year fixed effects Yes Yes Yes Yes
Company specific fixed effects Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes
Within R-squared 0.030 0.475 0.222 0.000
N 573545 573545 573545 573545
* p<0.05, ** p<0.01, *** p<0.001 T-values presented in parentheses.
Dependent variables
56