Audit committee characteristics and tax avoidance: Evidence from an emerging economy

Figures & data

Table 1. Variable definition

Variables	Definitions and measures
Tax avoidance
ETR	effective tax rate, calculated by Equation 2(2) $\mathrm{E}\mathrm{T}\mathrm{R}=\mathrm{C}\mathrm{u}\mathrm{r}\mathrm{r}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{e}\mathrm{x}\mathrm{p}\mathrm{e}\mathrm{n}\mathrm{s}\mathrm{e}/\mathrm{p}\mathrm{r}\mathrm{e}-\mathrm{t}\mathrm{a}\mathrm{x}\mathrm{i}\mathrm{n}\mathrm{c}\mathrm{o}\mathrm{m}\mathrm{e}$(2)
BTD	Total book-tax difference, calculated by Equation 3(3) $TotalBTD=\frac{EBIT-TI}{AvAssets}$(3)
Audit committee characteristics
ACSIZE	size of the audit committee
ACGEN	the percentage of female members in the audit committee
ACIND	the percentage of independent members
ACEXP	the proportion of financial and accounting experts in the audit committee
Control variables
FSIZE	Firm size: Logarithm of firm total asset
INSOWN	Institutional ownership: the proportion of ownership of the shares owned by institutional owners and blockholders at the end of the year
QINAU	Quality of independent audit: Get one if a firm uses Big 4 external audit service and zero otherwise
LEV	Firm leverage: long-term debt/total asset
ROA	Return on asset ratio: Net income/Total assets

Table 2. Descriptive statistic

	Obs	Mean	Std. dev.	Min	Max
ETR	3672	0.178	0.124	0.003	0.289
BTD	3672	0.009	0.078	0.001	0.012
ACSIZE	3672	8.842	0.367	0.000	9.000
ACGEN	3672	0.412	1.162	0.000	1.000
ACIND	3672	0.372	0.195	0.000	0.889
ACEXP	3672	0.568	0.157	0.000	0.778
FSIZE	3672	8.750	0.875	5.840	12.110
INSOWN	3672	0.587	0.298	0.054	0.723
QINAU	3672	0.672	0.712	0.000	1.000
LEV	3672	0.452	0.184	0.001	0.975
ROA	3672	0.015	0.028	−0.840	0.095

Note: This table reports some summary statistics for our 468 non-financial firms over the period 2010–2019. See Table 1 for variable definitions.

Table 3. Correlation matrix

	ETR	BTD	ACSIZE	ACGEN	ACIND	ACEXP	FSIZE	INSOWN	QINAU	LEV	ROA
ETR	1.000
BTD	0.665**	1.000
ACSIZE	−0.227***	0.630*	1.000
ACGEN	−0.499	−0.247**	0.393	1.000
ACIND	0.425**	−0.115***	0.220**	0.336*	1.000
ACEXP	−0.493	−0.339***	0.273	−0.326**	0.114	1.000
FSIZE	0.378*	0.387**	0.273***	0.142*	0.338***	0.417*	1.000
INSOWN	−0.206**	0.338	−0.338	0.377	0.338	−0.264	−0.160***	1.000
QINAU	−0.290	−0.243***	−0.249***	0.299**	0.094**	0.382*	−0.420*	0.296***	1.000
LEV	0.554***	−0.379	0.145	−0.522*	0.380	−0.339**	0.117	0.273*	0.311	1.000
ROA	0.375	−0.095	0.387**	0.601	0.206***	−0.152	−0.420**	0.339	0.289	0.234**	1.000

Note: This table reports the correlation matrix for primary variables. *, **, *** indicate statistical significance at the 1%, 5% and 10% level respectively. See Table 1 for variable definitions.

Table 4. Fixed effect estimation results for audit committee characteristics—tax avoidance relation

	ETR		BTD
Independent variables	Coeff	t-stat	Coeff	t-stat
ACSIZE	−0.024***	−3.152	0.001**	1.987
ACGEN	0.012**	2.214	−0.000***	−2.952
ACIND	0.009	0.924	−0.002	−0.875
ACEXP	0.005**	2.075	−0.001*	−1.786
FSIZE	−0.021*	−1.872	0.004	1.478
INSOWN	0.005	1.214	0.000*	1.272
QINAU	0.018*	1.798	−0.001**	−2.120
LEV	−0.007	−0.875	0.014	1.219
ROA	0.011	1.247	0.000	0.756
Const	0.423	0.217	0.017**	1.954
Industry dummy	yes		yes
Year dummy	yes		yes
R-square	0.323		0.347
Obs	3672		3672

Note: This table presents fixed effect method estimations relating audit committee characteristics and tow specific tax avoidance measures. All columns use country fixed effects. All variables were defined in Table 1. *Significance at the 10% level. **Significance at the 5% level. ***Significance at the 1% level.

Table 5. System GMM estimation results for audit committee characteristics—tax avoidance relation

	ETR		BTD
Independent variables	Coeff	t-stat	Coeff	t-stat
ACSIZE	−0.036***	−2.419	0.000*	1.821
ACGEN	0.041*	1.821	−0.002**	−2.142
ACIND	0.007*	1.725	−0.004	−1.524
ACEXP	0.092***	3.342	−0.000**	−1.927
FSIZE	0.036***	2.415	−0.003*	−1.786
INSOWN	−0.008	−1.532	0.000	0.954
QINAU	0.026**	1.896	−0.001***	−3.842
LEV	0.017	1.674	0.000	0.547
ROA	−0.036*	−1.782	0.002	1.238
Const	0.214	1.117	0.067*	1.826
Hansen J test (p-value)	0.423		0.245
AR(1) (p-value)	0.000		0.014
AR(2) (p-value)	0.324		0.425
Obs	3672		3672

Note: This table presents System GMM estimations relating audit committee characteristics and two specific tax avoidance measures. All variables were defined in Table 1. *Significance at the 10% level. **Significance at the 5% level. ***Significance at the 1% level.