Differences in Family-Owned SMEs’ Ethical Behavior: A Mixed Gamble Perspective of Family Firm Tax Evasion

Abstract

We develop a mixed gamble perspective of tax evasion that explains why family firms vary in how they weigh the costs and benefits of tax evasion. Testing our framework on family firms from India, we find that family firm identity is negatively related to tax evasion when firm performance is high. However, when firm performance is low, family firm identity is positively related to tax evasion. Our study therefore reveals why some family firms refrain from tax evasion, some rationalize it for the sake of the family firm, and others see tax evasion as a financial gain worth the risks.

Keywords

family business heterogeneity behaviors

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