Leisure Preference and Corporate Tax Planning

Using a novel cross-country measure of leisure preference to quantify managerial effort aversion, we examine its relation to corporate tax avoidance, and document a negative association between the two. The result is stronger for firms located in countries with a more complex tax system, and for firms with less access to tax consulting services — situations in which corporate tax planning can be especially onerous. Finally, tax planning appears to be one mechanism mediating the negative relation between leisure preference and firm value, implying that effort aversion is a source of agency costs that impedes value-enhancing tax planning activities