Military Experience and Corporate Tax Avoidance

From the battlefield to the boardroom: How military CEOs shape corporate tax strategy 

Law, K. K. F., and Mills, L. F. (2017). Military experience and corporate tax avoidance. Review of Accounting Studies, 22, 141-184.

Key takeaways:

• A CEO’s military background significantly influences their company’s approach to taxes, with firms led by veterans having higher tax rates and engaging in less aggressive tax avoidance.

• CEO-specific factors, especially military experience, explain a large portion of the differences in corporate tax strategies between companies, even more so than firm characteristics.

• Companies with military CEOs not only pay higher tax rates, but also maintain lower reserves for uncertain tax positions and utilize fewer tax havens.

• Boards that hire military CEOs tend to get more conservative tax planning, but also benefit from less aggressive financial reporting in other areas that would otherwise require greater governance.