Upper Echelons and Corporate Tax Behavior: The Role of CEO Overconfidence and Financial Education

This study examined the association between CEO overconfidence and tax avoidance and the moderating effect of financial education in Indonesian manufacturing enterprises. Based on the Upper Echelons Theory and behavioral executive theory, we hypothesized that overconfident CEOs are more likely to underestimate the regulatory risk and participate in more tax avoidance. Financial education should contribute to curbing this trend by strengthening the ability of the executives to recognize financial and tax-related risks. This study extends the behavioral taxation literature by investigating financial education as a moderating mechanism that can assist in reducing the effect of overconfidence on company tax decisions through the cognitive capabilities of the executives. This study used a panel regression analysis with a fixed effects model based on panel data of ۵۲۰ firm-year observations of manufacturing enterprises listed on the Indonesia Stock Exchange from ۲۰۲۰ to ۲۰۲۴. Tax avoidance was measured by the cash effective tax rate (CETR). The findings showed that CEO overconfidence is positively related to tax evasion, but financial education weakens the positive association between CEO overconfidence and tax avoidance. The results indicated that overconfident CEOs with a financial education background may be less inclined to avoid taxes. This paper adds to the behavioral taxation literature that emphasizes the significance of executive cognition and educational capacity in shaping business tax decisions.

کلیدواژه ها:

Behavioral Taxation ، Financial Education ، Overconfidence ، Tax avoidance ، Upper Echelons Theory