Economic consequences of tax director departure

ABSTRACT

This study investigates the economic consequences of the departure of a tax director. In addition, we examine whether the market reactions to such a departure are associated with the director’s gender. Using a sample of 471 U.S. firms, we find positive market reactions to the announcement of tax director departures. Our results further show lower cumulative abnormal returns for female tax directors than for male tax directors. Our findings suggest that the market values tax directors’ departure and gender. Our study has implications for practitioners in terms of the selection of tax directors.

KEYWORDS:

• Tax director departure
• market reactions
• gender
• agency problem

JEL CLASSIFICATION:

• M41
• G14
• M12
• M50

Acknowledgments

We thank Professor Hua-Wei Huang for his valuable comments. We thank two anonymous reviewers and conference participants of 2022 AAA Ohio Region Meeting for their valuable comments. This research is partially supported by the MOST (Ministry of Science and Technology) research project (MOST 110-2410-H-006-001) and “Higher Education SPROUT Project” and “Center for Innovative FinTech Business Models” of National Cheng Kung University (NCKU), sponsored by the Ministry of Education, Taiwan, ROC.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The title of the position of tax director varies. Following Schulman (2020), we encompass common titles including tax accountant, tax director, tax manager, legal counsel, and general counsel.

Additional information

Funding

This work was supported by the Ministry of Science and Technology, Taiwan, ROC. [MOST 110-2410-H-006-001]; Ministry of Education, Taiwan, ROC. [Center for Innovative FinTech Business Models, Higher Education SPROUT Project].