Impact of the Board of Directors as an Internal Governance Mechanism on Tax Risk within the Company: A Literature Review and Proposed Conceptual Model

Abstract

In a context characterized by increased competition among companies operating in dynamic environments, the intersection of corporate governance and tax risk constitutes a fertile field of research, given that a company's tax strategy is a key factor ensuring its sustainability and growth. Within this framework, corporate governance, through its internal mechanisms, plays a decisive role in managing tax risk by addressing tax fraudulent behavior to ensure the company's compliance with applicable tax regulations. Furthermore, combating tax fraud strengthens and protects state revenue, as tax revenue represents a significant portion of it. This underscores the importance of the board of directors' role as an internal corporate governance mechanism in managing, controlling, and mitigating tax risk. This literature review, based on in-depth analysis and constituting a state-of-the-art synthesis of knowledge and studies on this subject, will first allow us to explore the concepts of corporate governance, board of directors, and tax risk, while presenting the theoretical foundations of the relationship between corporate governance and tax risk by discussing shareholder and stakeholder theories of corporate governance. Subsequently, we will examine the role played by the board of directors as an internal corporate governance mechanism in tax risk management through an overview of empirical studies that have examined the impact of board characteristics on tax risk, concluding with the formulation of research hypotheses and the development of the conceptual model. The objective is to determine the board characteristics that reduce the probability of tax risk within the company.

Classification JEL : G34 & H26

Paper type : Theoretical Research