CEO Sports Hobby and Firms' Tax Aggressiveness

What is it about?

Recent accounting research suggests that individual executives play a significant role in shaping a firm's tax planning. Building on psychology research that finds sports interests reflect an individual's risk-taking preferences, we develop a novel measure of innate and non-pecuniary CEO risk attitudes based on the riskiness of CEOs' sports hobbies and examine whether the measure is associated with corporate tax aggressiveness. We find that firms managed by CEOs with riskier sports hobbies are more aggressive in their tax planning. This association is more pronounced for CEOs with greater financial incentives and greater power in making decisions. Our results are robust to using alternative measures of CEO sports risks, and after accounting for the self-selection of the disclosure of CEO sports hobbies.

Featured Image