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Labor unions and tax aggressiveness

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  • Chyz, James A.
  • Ching Leung, Winnie Siu
  • Zhen Li, Oliver
  • Meng Rui, Oliver

Abstract

We examine the impact of unionization on firms' tax aggressiveness. We find a negative association between firms' tax aggressiveness and union power and a decrease in tax aggressiveness after labor union election wins. This relation is consistent with labor unions influencing managers' in one, or both, of two ways: (1) constraining managers' ability to invest in tax aggressiveness through increased monitoring; or (2) decreasing returns to tax aggressiveness that arise from unions' rent seeking behavior. We also find preliminary evidence that the market expects these reductions around union elections and discounts firms that likely add shareholder value via aggressive tax strategies.

Suggested Citation

  • Chyz, James A. & Ching Leung, Winnie Siu & Zhen Li, Oliver & Meng Rui, Oliver, 2013. "Labor unions and tax aggressiveness," Journal of Financial Economics, Elsevier, vol. 108(3), pages 675-698.
    • Handle: RePEc:eee:jfinec:v:108:y:2013:i:3:p:675-698
    DOI: 10.1016/j.jfineco.2013.01.012
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    More about this item

    Keywords

    Labor union; Tax aggressiveness;

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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