Political expenditures are made by corporations to potentially influence legislators, regulators, and to encourage favorable outcomes for the corporation, such as policies which help reduce their corporate taxes. Using political spending data from Opensecrets.org, we examine whether S&P 500 firms that invest in political spending or are in industries with trade associations that invest in political spending accrue greater future tax benefits. Controlling for endogeneity, we first show that companies do not necessarily need to politically spend themselves; instead they can benefit from lower taxes from a spillover effect from trade group contributions. However, the benefit is not as large as if the firm contributed themselves. Companies benefit from investing in political spending by reducing both their Generally Accepted Accounting Principles (GAAP) and Cash ETRs, particularly if the firms use think tank and lobbying contributions which focus on tax issues. However, trade group contributions should focus on political contributions to candidates, particularly if those candidates are members of the Senate Finance or House Ways and Means committees. Finally, although there is a trailing effectiveness of political spending, a company needs to maintain it's spending in order to maintain the same level of tax savings as they have enjoyed in the past. The results are robust to a number of additional tests to control for causality and endogeneity. Overall, these results give additional insight into better understanding how different forms of political spending can benefit companies by lowering taxes.

We analyze the relation of private firms' CEO compensation with the probability of sale of a firm and its valuation at the time of the sale. Specifically, we study whether equity-based remuneration is consistent with compensating the CEO for effort related to selling the private firm, or with compensating for the illiquidity of the equity-based compensation for private firms. Using a sample of large private firms with public filings, we find that CEOs of IPO and acquired private firms have higher total and equity-based compensation than CEOs of firms that remain private. We also show that CEO compensation is positively related to the valuation premium of IPOs versus acquired firms.

Using a cross-country sample, we examine the chief executive officer (CEO) tournament structure (measured alternatively as the ratio and the difference of pay between the CEO and other top executives within a firm). We find the tournament structure to vary systematically with firm and country cultural characteristics. In particular, firm size and the cultural values of power distance, fair income differences, and competition are significantly associated with variations in tournament structures. We also establish support for the primary implication of tournament theory in that tournament structure tends to be positively related to firm value, even after controlling for endogeneity.