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Journal of Banking & Finance Vol. 37 No. 8 2013

The effectiveness and valuation of political tax minimization

Matthew D. Hill1,2; Thomas R. Kubick3,4; G. Brandon Lockhart; Huishan Wan5,3

1 Arkansas State University · 2 University of Mississippi · 3 University of Nebraska–Lincoln · 4 University of Kansas · 5 University of Iowa

open access

Abstract

We find evidence suggesting that corporate lobbying for tax purposes over the period 1999–2009 is one method by which firms managed corporate taxes. Furthermore, tax management strategies employed by these politically active firms were valued by shareholders. Firms lobbying on tax issues have lower book effective taxes and greater discretionary permanent differences in GAAP and IRS taxable income. Investors place a premium on lobbying activities for tax purposes unless the firm already has a low effective tax rate or very high book-tax differences. We conclude that lobbying political officials is one method by which firms manage risks attendant an aggressive tax strategy.

DOI
10.1016/j.jbankfin.2013.04.002
Volume
37
Issue
8
Pages
2836-2849
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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