External social networks and tax avoidance

We investigate the role of external social networks in corporate tax strategies. Using data on Taiwan-listed nonfinancial firms from 2004 to 2022, we construct executives’ external social networks by measuring their ties with the directors or executives of other listed firms with the similar characteristics of educational backgrounds and working experiences as well as other activities such as training courses, business forums, and meetings. Our empirical analyses show that firms whose CEOs and CFOs have stronger network ties are more likely to aggressively avoid taxes, and such a phenomenon is robust to different regression models. With more insightful depth, the network-tax relations are significant only for subsamples of firms whose executives have a financial or accounting background. We contribute to the literature on tax avoidance by demonstrating how an external social network is another crucial characteristic of executives that influences corporate tax avoidance.