Do board and audit committee independence affect tax reporting aggressiveness

This study examines whether board and audit committee independence impact tax reporting aggressiveness. Fixed-effects regression results using a panel of 2,612 firm-years between 1998 and 2001 reveal a negative and nonlinear association between audit committee independence and tax aggressiveness. The evidence suggests that more independent audit committees are more effective in reducing aggressive tax avoidance (over most of the range of independence), but there is a level of audit committee independence (roughly two-thirds) at which tax reporting aggressiveness is minimized. I find no association between board independence and tax aggressiveness, nor do I find evidence of an interaction between independence and director stock ownership for either body.