Effect of Corporate Governance on Tax Avoidance

Abstract

This paper explores the relationship between corporate governance mechanisms and tax avoidance practices within firms. Tax avoidance has garnered significant attention from scholars and policymakers due to its implications for corporate financial performance, shareholder value, and societal welfare. Corporate governance, as a system of controls and mechanisms designed to ensure accountability and transparency in decision-making processes, plays a crucial role in shaping firms' tax behavior. Through a comprehensive review of existing literature and empirical evidence, this study elucidates the various channels through which corporate governance influences tax avoidance strategies. Key governance mechanisms such as board composition, executive compensation structures, ownership concentration, and the presence of independent directors are examined in relation to their effects on tax planning and compliance. The findings contribute to a deeper understanding of the complex interplay between corporate governance and tax management strategies, highlighting implications for both academic research and practical policymaking.