Does it cost to be politically connected? An examination of the grabbing hand hypothesis using corporate taxes

Taufiq Arifin, Rezaul Kabir, Iftekhar Hasan

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    Abstract

    We study a channel through which politicians use corporate taxes to extract firm’s resources. We find that politically-connected firms pay higher taxes than their non-connected counterparts. Using election as an exogenous shock, we also observe that politically-connected firms pay higher taxes during election years to support the incumbent political regime. The results of the study indicate that favorable economic indicators, e.g. tax revenue, are vitally important to politicians and provide rent seeking incentive to achieve their political objective, e.g. gaining votes.
    Original languageEnglish
    Number of pages38
    Publication statusPublished - 29 May 2019
    Event42nd Annual Congress of the European Accounting Association, EAA 2019 - Aliathon Holiday Village Hotel, Paphos, Cyprus
    Duration: 29 May 201931 May 2019
    Conference number: 42

    Conference

    Conference42nd Annual Congress of the European Accounting Association, EAA 2019
    Abbreviated titleEAA
    Country/TerritoryCyprus
    CityPaphos
    Period29/05/1931/05/19

    Keywords

    • political connections
    • corporate taxes
    • elections

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