Santanu Mitra accepted for publication in Review of Quantitative Finance and Accounting
Mike Ilitch School of Business Professor of Accounting Santanu Mitra has had a paper accepted for publication in the Review of Quantitative Finance and Accounting, which publishes research involving the interaction of finance with accounting, economics and quantitative methods.
The paper, “Firm-level political risk and corporate tax avoidance,” was co-authored by Mahmud Hossain (University of West Georgia) and Gerald Lobo (University of Houston).
This study investigates whether firm-level political risk increases managers’ propensity to avoid taxes. Using a measure of firm-level political risk developed by Hassan et al. (Quart JEconom 134(4):2135–2202, 2019) and several commonly used measures of tax avoidance, we find that corporate tax avoidance increases with firm-level political risk and that the main results hold in various supplemental and endogeneity tests. In cross-sectional tests, we document that the positive relationship between firm-level political risk and tax avoidance is stronger for lower levels of tax avoidance, and is weaker when firms have superior cash flow performance and higher cash holdings. In addition, we show that the positive relationship between firm-level political risk and tax avoidance is stronger during the Trump administration’s trade policy changes as well as during the global financial crisis.