Journal of Financial Economics2013-09-05 2:57 AM

Labor unions and tax aggressiveness

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.

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Journal of Financial Economics

The Journal of Financial Economics or JFE is a peer-reviewed academic journal covering theoretical and empirical topics in financial economics. Together with the Journal of Finance and the Review of Financial Studies, it is considered to be among the top three finance journals.

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