How Do Italian Private Companies Respond to a Reduction in the Corporate Standard Tax Rate? A Focus on the Ownership Gender Diversity Effect

Abstract

Cuts in the corporate standard tax rate can encourage companies to manage their earnings in order to save on taxes by shifting earnings from the fiscal year in which it is higher to the fiscal year in which it is lower. This phenomenon has been very little explored for private companies, despite their importance in many countries around the world. Moreover, no previous study has verified whether certain features of private companies’ ownership structure may affect the aforementioned phenomenon. In order to contribute to filling this knowledge gap, this study aims to verify whether the gender of the owners has any impact. Focusing on Italian private companies, this study shows that they responded to the cut in the corporate standard tax rate that came into force in fiscal year 2017 by putting in place earnings management practices that shifted profits from FY 2016 to FY 2017. At the same time, it shows that the gender of owners has not had any impact on the phenomenon; in other words, Italian female-owned and male-owned private companies do not behave in statistically different ways.