Does audit committee chair expertise combat tax avoidance in emerging markets? Direct and indirect investigation

This study aims to investigate whether an audit committee chair with accounting expertise affects tax avoidance, and how real earnings management mediates this effect.
Design/methodology/approach
Using data from companies listed on the Omani capital market, this study uses a mediation analysis to examine the relationships between audit committee chair expertise, real earnings management and tax avoidance. Robustness checks and cross-sectional analyses are also performed.
Findings
The findings reveal that audit committee chairs with accounting expertise have an insignificant direct influence on tax avoidance. However, real earnings management significantly mediates this relationship. Specifically, an audit committee chair with accounting expertise mitigates real earnings management, which increases tax avoidance. Additionally, this study finds that an audit committee chair’s religiosity and the nature of the company (family versus nonfamily) affect the extent to which tax avoidance and earnings management practices are curbed.

Practical implications
The authors provide valuable insights for practitioners, policymakers and researchers by highlighting the role of audit committee chairs with accounting expertise in influencing corporate activities, particularly in mitigating real earnings management and its subsequent impact on tax avoidance.

Originality/value
This study contributes to the literature by exploring the indirect effect of audit committee chair expertise on tax avoidance through earnings management. It also adds a novel dimension by examining the influence of a chairperson’s religiosity and family ownership on these practices.