臺大管理論叢 NTU Management Review VOL.29 NO.2

The Relationship between Board Interlocks and Corporate Tax Avoidance 224 influential, because executive directors have greater firsthand experience and knowledge about specific tax strategies. Thus, they have more power to influence corporate decision- making. Moreover, this study reveals that board ties to firms’ low-tax family members have a strong effect on the diffusion of tax avoidance. These findings suggest that, in the transfer of tax avoidance knowledge, strong network ties are beneficial. In addition to direct ties of board interlocks, the empirical results of this study reveal that firms have network ties to low-tax firms engaging the same auditor, and these ties are likely to be more influential in the transfer of knowledge of tax avoidance. This implies that indirect ties may be helpful in amplifying the effect of direct ties. In supplementary tests, this study finds a significant positive correlation between network ties formed by directors with accounting or financial expertise ( SPECIALTY ) and PBTD , suggesting that ties formed by directors with accounting or financial expertise have a strong effect on the diffusion of tax avoidance. However, this study does not find a significant relationship between tax avoidance and ties formed by independent directors to low-tax firms. This result implies that independent directors in Taiwan maintain professionalism and independence. 4. Research Limitations/Implications The empirical results of this study suggest that not all types of network ties have the same effect on corporate tax avoidance. This study finds that strong ties are particularly beneficial in facilitating the transfer of tacit and complex knowledge, such as that on tax avoidance strategies. In addition to examining the direct ties of board interlocks, this study reveals that indirect ties are effective in the diffusion of tax avoidance. These findings are potentially useful in identifying the types of firms that most likely engage in tax avoidance, and thus may help tax authorities to improve their auditing strategies in the future, especially for those concerned about declining corporate tax revenues. In addition, the findings are informative for firms hoping to gain useful tax strategies though board interlocks. However, this study has limitations. First, the limited time period may inhibit generalizing the results to other time periods; therefore, longer time periods should be addressed by future research. Second, it is difficult to evaluate the level of corporate tax avoidance; thus, researchers should develop other more precise measures to evaluate tax avoidance.