The Effect of Managerial Ability on Corporate Tax Avoidance

Managerial ability is one of the factors that affect firm strategy and performance. However, most prior studies do not consider these managerial effects on firms. Hence, this paper used Data Envelope Analysis to see whether managers with higher ability can affect corporate tax avoidance. Using panel data from a sample of 172 public firms in Indonesia for five years, this study finds that the higher the managerial ability, the lower the tax avoidance practices occurring in the firm. This result is robust in several sensitivity tests. Keywords— tax avoidance; managerial ability; manager