Employee Share Ownership and Tax Avoidance: The Moderating Role of Board Independence in SBF 120 Firms

Corporate tax avoidance continues to attract scrutiny from regulators and researchers alike, yet little is known about how governance mechanisms behave when they operate together rather than in isolation, since most studies still treat ownership structure and board composition as separate levers.This paper examines whether employee share ownership and board independence reinforce or offset one another in shaping tax avoidance among SBF 120 (Société des Bourses Françaises 120) firms, using a panel of 104 French listed companies observed from 2011 to 2023, with 1,120 firm-year observations in the main models.We estimate dynamic panel models via system Generalized Method of Moments, an approach chosen for its ability to handle the endogeneity concerns and behavioral persistence that typically arise in tax research.The results show that firms with higher employee ownership report a higher Cash Effective Tax Rate (ETR), that is, less tax avoidance, a pattern consistent with employee-shareholders who, unable to separate their savings from their job security, tend to favor fiscal caution.Board independence works in the opposite direction, with more independent boards associated with a lower Cash ETR -a pattern more consistent with an advisory than a disciplinary role, though this interpretation is not directly tested here and should be read as suggestive rather than confirmatory.The most notable finding concerns the interaction between the two: when board independence is high, the tax-restraining effect of employee ownership is stronger, pointing to a complementary rather than substitutive relationship between the two mechanisms.The difference is statistically clear but modest in size.When Book-Tax Differences replaces Cash ETR as the dependent variable, the coefficients keep the expected signs, with weaker significance.Taken together, these findings suggest that ownership structure and board composition do not simply add up their separate effects on tax behavior but interact with one another, challenging the additive logic that still dominates much of the governance literature and offering evidence from a civil law setting where this particular pairing had received little attention.