CEOs’ Prosocial Tendency and Corporate Tax Aggressiveness

ABSTRACT Many CEOs are philanthropists who express their passion for social welfare through work with various charities and foundations. However, the consequences of these prosocial behaviors for their firms are unclear. This study investigates whether CEOs’ prosocial tendency, measured by their service on the boards of one or more charities, is associated with corporate tax aggressiveness. We find that firms with CEOs who have prosocial tendency have a lower level of tax aggressiveness than firms with CEOs who do not have this tendency. We further find that financial incentives may diminish the inhibitory effect of CEO prosocial tendency on corporate tax aggressiveness. By contrast, a firm’s positive reputation could strengthen the inhibitory effect of prosocial tendency on tax aggressiveness. Our results provide evidence that CEO prosocial tendency influences a firm’s tax planning and policies. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D64; H25.