Labor Unions and Tax Aggressiveness
Posted: 31 Jul 2010 Last revised: 22 Sep 2013
Date Written: April 27, 2013
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.
Keywords: Labor unions, tax aggressiveness
JEL Classification: H25, H26, J53
Suggested Citation: Suggested Citation