The Moderating Effect of Tax Risk on the Relationship Between CEO Duality and Tax Aggressiveness in Brazilian Publicly Traded Companies

Abstract

This study examines the moderating effect of tax risk on the relationship between CEO duality and tax aggressiveness in Brazilian publicly traded companies. The analysis addresses the corporate governance and taxation literature by focusing on leadership structure and tax risk within an emerging-market context characterized by high tax burdens and regulatory complexity. The empirical analysis relies on panel data from 159 firms over the 2010–2024 period, comprising 1,321 firm-year observations, and employs the Feasible Generalized Least Squares (FGLS) estimator. Tax aggressiveness is assessed using effective tax rate (ETR) and cash ETR measures, while tax risk is proxied by the volatility of these indicators. The results indicate a positive and statistically significant association between CEO duality and ETR, whereas no statistically significant association emerges for cash ETR. Given the conventional inverse interpretation of ETR and cash ETR as proxies for tax aggressiveness, the positive ETR coefficient indicates higher effective taxation and, consequently, lower tax aggressiveness. Tax risk exhibits a positive and statistically significant moderating effect on the relationship between CEO duality and tax aggressiveness when measured by cash ETR, suggesting lower tax aggressiveness under higher tax risk among firms with CEO duality. COVID-19 effects vary across tax aggressiveness measures and models. The findings contribute to the literature by highlighting the joint relevance of leadership structure and tax risk for corporate tax decisions in emerging markets.