Upper Echelons and Corporate Tax Behavior: The Role of CEO Overconfidence and Financial Education

Articles in Press

Document Type : Original Article

Authors

Juli Ratnawati ¹

Anis Chariri ²

Dwi Cahyo Utomo ²

¹ Doctoral Program, Faculty of Economics and Business, Universitas Diponegoro, Semarang, Central Java, Indonesia

² Accounting Department, Faculty of Economics and Business, Universitas Diponegoro, Indonesia

10.22067/ijaaf.2026.98919.1666

Abstract

This study examines the effect of CEO overconfidence on tax avoidance and the moderating role of financial education in Indonesian manufacturing firms. Drawing on Upper Echelons Theory and behavioral executive theory, the study argues that overconfident CEOs tend to underestimate regulatory risk and engage in higher tax avoidance activities. Financial education is expected to reduce this tendency by improving executives’ ability to evaluate financial and tax-related risks. Using panel data from 520 firm-year observations of manufacturing companies listed on the Indonesia Stock Exchange during 2020–2024, this study applies panel regression analysis with a Fixed Effect Model. Tax avoidance is measured using the Cash Effective Tax Rate (CETR). The results show that CEO overconfidence is significantly associated with higher tax avoidance, while financial education weakens the positive relationship between CEO overconfidence and tax avoidance. These findings indicate that financial educational backgrounds may reduce the tendency of overconfident CEOs to engage in higher tax avoidance activities. This study contributes to the behavioral taxation literature by emphasizing the importance of executive cognition and educational capability in shaping corporate tax decisions.

Keywords

CEO Overconfidence

Tax Avoidance

Financial Education

Upper Echelons Theory

Behavioral Taxation

Subjects

• Accounting

---