Firm-level political sentiment and corporate tax avoidance

Yi Liu, Justin Jin, Zehua Zhang and Ran Zhao

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: This paper examines how managers' tone on political issues in earnings conference calls relates to corporate tax avoidance. We find a positive relationship between managers' tone of using political linguistics and tax avoidance, while controlling for non-political tone. The relationship is more pronounced for firms with greater political exposure, higher lobbying expenditures, greater information asymmetry, and more risk-taking. The empirical results remain robust with various additional checks. Overall, our evidence suggests that managers employ the sentiment of political risk disclosure for aggressive tax purposes.

Keywords: Political sentiment; Tax avoidance; Lobbying; Information asymmetry; Risk-taking (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003088

DOI: 10.1016/j.irfa.2022.102358

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