Banker Directors on Board and Corporate Tax Avoidance

We investigate how shareholder-and-debtholder conflicts of interest affect corporate tax avoidance using a unique setting of the affiliated and unaffiliated commercial bankers’ board representation. We find that appointing affiliated banker directors, but not unaffiliated banker directors, significantly reduces firms’ tax avoidance behavior. Such a reduction is stronger among firms with larger conflicts of interest between shareholders and debtholders, e.g., those with weaker corporate governance and higher leverage. We find that affiliated banker directors show stronger motivation in reducing tax avoidance aggressiveness and protecting the debtholders’ interest