Managers’ Personal Political Orientation and Corporate Tax Avoidance

Posted: 13 Feb 2012

See all articles by Dane M. Christensen

Dane M. Christensen

University of Oregon

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Date Written: December 2011

Abstract

This study investigates whether managers’ personal political orientation helps explain tax avoidance at the firms they manage. Results reveal the intriguing finding that, on average, firms with top executives who lean toward the Republican Party actually engage in less tax avoidance than firms whose executives lean toward the Democratic Party. These findings are consistent with the argument that Republican managers’ preference for lower taxes is dominated by their desire to be conservative. Thus, the conservative tone at the top they set leads the firm to engage in less tax avoidance than firms that are run by Democrat managers. Additionally, we find that this effect appears to be driven by the subset of managers who are entrenched, which is consistent with managers having more freedom to imprint their personal preferences on firms with weaker governance. We also examine changes in tax avoidance around CEO turnovers and find corroborating evidence.

Suggested Citation

Christensen, Dane M. and Dhaliwal, Dan S., Managers’ Personal Political Orientation and Corporate Tax Avoidance (December 2011). 2012 American Taxation Association Midyear Meeting: New Faculty/Doctoral Student Session, Available at SSRN: https://ssrn.com/abstract=2003903

Dane M. Christensen (Contact Author)

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

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