Labor Unions and Tax Aggressiveness

Posted: 31 Jul 2010 Last revised: 22 Sep 2013

See all articles by James Chyz

James Chyz

University of Tennessee, Knoxville - Department of Accounting and Business Law

Winnie Siu Ching Leung

The Chinese University of Hong Kong

Oliver Zhen Li

National University of Singapore (NUS)

Oliver M. Rui

China Europe International Business School (CEIBS)

Date Written: April 27, 2013

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.

Keywords: Labor unions, tax aggressiveness

JEL Classification: H25, H26, J53

Suggested Citation

Chyz, James and Leung, Siu Ching and Li, Oliver Zhen and Rui, Oliver M., Labor Unions and Tax Aggressiveness (April 27, 2013). Journal of Financial Economics (JFE), Vol. 108, No. 3, 2013. Available at SSRN: https://ssrn.com/abstract=1498663 or http://dx.doi.org/10.2139/ssrn.1498663

James Chyz

University of Tennessee, Knoxville - Department of Accounting and Business Law ( email )

Knoxville, TN
United States
865-974-1701 (Phone)

Siu Ching Leung

The Chinese University of Hong Kong ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Oliver Zhen Li (Contact Author)

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

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