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Article

Managerial Ability and Tax Planning: Trade-Off between Tax and Nontax Costs

Department of Business Administration, Seoul National University of Science and Technology, 232 Gongneung-ro, Nowon-gu, Seoul 01811, Korea
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Sustainability 2020, 12(1), 370; https://doi.org/10.3390/su12010370
Received: 7 December 2019 / Revised: 25 December 2019 / Accepted: 30 December 2019 / Published: 2 January 2020
This study aims to investigate the effects of managerial ability (MA) on the trade-off between tax and nontax costs in the sustainability perspectives of firms. An effective tax planning for corporate sustainability is to consider tax and financial reporting costs at the same time and find the optimal cost balance that exists between these two costs. MA is measured by the data envelopment analysis (DEA) frontier and Tobit regression model. DEA frontier methods can be measured by capturing the changes in market value, excluding the characteristics of firms, which are beyond management control. The interest variables of this study are tax costs, nontax costs, and the trade-off between them. This study has three main findings. First, a significantly positive relationship exists between MA and the tax cost variable. Second, a significantly negative relationship exists between MA and the nontax cost variable. Third, MA has a negative relation with the trade-off between tax and nontax costs. Therefore, this study is the first to analyze the relationship between MA and the trade-off between tax and nontax costs. This study implies that a manager should consider the trade-off between tax and nontax costs to improve the firm’s value as MA is reflected by tax and financial reporting simultaneously. View Full-Text
Keywords: managerial efficiency; sustainability of firms; tax planning; tax costs; nontax costs; trade-off managerial efficiency; sustainability of firms; tax planning; tax costs; nontax costs; trade-off
MDPI and ACS Style

Lee, K.; Yoon, S. Managerial Ability and Tax Planning: Trade-Off between Tax and Nontax Costs. Sustainability 2020, 12, 370. https://doi.org/10.3390/su12010370

AMA Style

Lee K, Yoon S. Managerial Ability and Tax Planning: Trade-Off between Tax and Nontax Costs. Sustainability. 2020; 12(1):370. https://doi.org/10.3390/su12010370

Chicago/Turabian Style

Lee, KangYoung, and SungMan Yoon. 2020. "Managerial Ability and Tax Planning: Trade-Off between Tax and Nontax Costs" Sustainability 12, no. 1: 370. https://doi.org/10.3390/su12010370

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