Corporate governance mechanism and family influence impact on tax avoidance behaviours of UK family firms.

Abstract

This thesis investigates the complex relationships between corporate governance mechanisms, family influence, and tax avoidance behaviours in UK family firms. Drawing on agency theory and socio-emotional wealth perspectives, the study addresses critical gaps in understanding how corporate governance mechanisms’ influence on tax avoidance varies between family and non-family firms and how different dimensions of family influence shape tax planning strategies. Using a quantitative research design, the study analyses a balanced panel dataset of 80 UK-listed firms (40 family and 40 non-family firms) over the period 2007-2019. Data was sourced from NRG Metrics, FAME, and company annual reports. The empirical analysis employs System GMM and two-stage least squares (2SLS) estimators to address endogeneity concerns, with fixed-effects and random-effects models serving as robustness checks. The research progresses through three interconnected empirical studies examining: (1) comparative differences in governance effectiveness between family and non- family firms; (2) the direct effects of family ownership concentration and board representation on tax avoidance; and (3) the moderating role of family influence on governance-tax avoidance relationships. Key findings reveal a dual-channel framework of family influence where family ownership concentration and board representation serve distinct but complementary functions. Family board representation provides direct strategic control over tax decisions, while family ownership concentration enhances the effectiveness of formal governance mechanisms. Notably, the study demonstrates that board independence operates differently in family firm contexts, with independent directors functioning as a strategic resource rather than solely as a monitoring mechanism. The research makes significant theoretical contributions by resolving contradictory findings in family business literature through the establishment of this dual-channel family influence framework. It demonstrates that family influence dimensions operate through different pathways rather than have competing functions. While family board representation dominated direct effects of tax avoidance, family ownership concentration dominated the moderation effects across multiple governance domains. The study provides evidence for context-dependent governance effectiveness, showing how governance mechanisms may operate differently across organizational forms. Practical implications include insights for regulators developing family firm-specific governance frameworks, guidance for family business owners balancing tax efficiency with reputational concerns, and recommendations for institutional investors evaluating family firm governance quality. The study contributes to ongoing policy debates around corporate tax transparency and governance effectiveness in privately influenced firms. The research advances understanding of corporate governance heterogeneity across organizational forms and provides empirical evidence for the need to differentiate governance expectations and regulatory approaches between family and non-family firms. Future research directions include cross-country comparative studies, and exploration of governance mechanisms specific to family firm contexts.