Abstract
Empirical evidence linking campaign financing activity to future firmbenefits is mixed. However, theory suggests that an important aspect of a successful political strategy is amulti-period investment in cultivating relationshipswith key policymakers (Snyder 1992). We examine a specific setting and investigate whether firms that invest in relationships with tax policymakers via campaign contributions accrue greater future tax benefits. We find that firms that pursue a more relational approach to corporate political activity have lower future cash and GAAP effective tax rates (ETRs) and less volatile future cash ETRs. Further, we provide evidence of an incremental effect of tax-specific lobbying for firms that develop stronger relationships with tax policymakers via PAC support. Thus, our study links taxspecific PAC support to tax-specific outcomes, providing an economic link for the observed contribution-return relation documented in Cooper, Gulen, and Ovtchinnikov (2010).
| Original language | English (US) |
|---|---|
| Pages (from-to) | 69-102 |
| Number of pages | 34 |
| Journal | Journal of the American Taxation Association |
| Volume | 37 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 1 2015 |
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Keywords
- Campaign contributions
- Effective tax rates
- Political connections
ASJC Scopus subject areas
- Finance
- Accounting
Cite this
The benefits of a relational approach to corporate political activity : Evidence from political contributions to tax policymakers. / Brown, Jennifer; Drake, Katharine; Wellman, Laura.
In: Journal of the American Taxation Association, Vol. 37, No. 1, 01.03.2015, p. 69-102.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - The benefits of a relational approach to corporate political activity
T2 - Evidence from political contributions to tax policymakers
AU - Brown, Jennifer
AU - Drake, Katharine
AU - Wellman, Laura
PY - 2015/3/1
Y1 - 2015/3/1
N2 - Empirical evidence linking campaign financing activity to future firmbenefits is mixed. However, theory suggests that an important aspect of a successful political strategy is amulti-period investment in cultivating relationshipswith key policymakers (Snyder 1992). We examine a specific setting and investigate whether firms that invest in relationships with tax policymakers via campaign contributions accrue greater future tax benefits. We find that firms that pursue a more relational approach to corporate political activity have lower future cash and GAAP effective tax rates (ETRs) and less volatile future cash ETRs. Further, we provide evidence of an incremental effect of tax-specific lobbying for firms that develop stronger relationships with tax policymakers via PAC support. Thus, our study links taxspecific PAC support to tax-specific outcomes, providing an economic link for the observed contribution-return relation documented in Cooper, Gulen, and Ovtchinnikov (2010).
AB - Empirical evidence linking campaign financing activity to future firmbenefits is mixed. However, theory suggests that an important aspect of a successful political strategy is amulti-period investment in cultivating relationshipswith key policymakers (Snyder 1992). We examine a specific setting and investigate whether firms that invest in relationships with tax policymakers via campaign contributions accrue greater future tax benefits. We find that firms that pursue a more relational approach to corporate political activity have lower future cash and GAAP effective tax rates (ETRs) and less volatile future cash ETRs. Further, we provide evidence of an incremental effect of tax-specific lobbying for firms that develop stronger relationships with tax policymakers via PAC support. Thus, our study links taxspecific PAC support to tax-specific outcomes, providing an economic link for the observed contribution-return relation documented in Cooper, Gulen, and Ovtchinnikov (2010).
KW - Campaign contributions
KW - Effective tax rates
KW - Political connections
UR - http://www.scopus.com/inward/record.url?scp=84943515653&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84943515653&partnerID=8YFLogxK
U2 - 10.2308/atax-50908
DO - 10.2308/atax-50908
M3 - Article
AN - SCOPUS:84943515653
VL - 37
SP - 69
EP - 102
JO - Journal of the American Taxation Association
JF - Journal of the American Taxation Association
SN - 0198-9073
IS - 1
ER -