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The effectiveness and valuation of political tax minimization

Author

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  • Hill, Matthew D.
  • Kubick, Thomas R.
  • Brandon Lockhart, G.
  • Wan, Huishan

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.

Suggested Citation

  • Hill, Matthew D. & Kubick, Thomas R. & Brandon Lockhart, G. & Wan, Huishan, 2013. "The effectiveness and valuation of political tax minimization," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2836-2849.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:8:p:2836-2849
    DOI: 10.1016/j.jbankfin.2013.04.002
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    References listed on IDEAS

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    Cited by:

    1. Blaufus, Kay & Möhlmann, Axel & Schwäbe, Alexander, 2016. "Corporate tax minimization and stock price reactions," arqus Discussion Papers in Quantitative Tax Research 204, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item

    Keywords

    Tax avoidance; Tax aggressiveness; Book-tax differences; Corporate lobbying;

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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