Judge Ideology and Corporate Tax Planning

We investigate whether judges’ political ideology affects corporate tax behaviors. We find<br/>firms engaging in less aggressive tax planning when Circuit Court judges are more liberal.<br/>Cross-sectionally, the deterrent effect of liberal judge ideology is more pronounced for firms<br/>that engage in judiciary-sensitive tax strategies, face higher enforcement risk from the<br/>Internal Revenue Service, or have larger reputational costs from tax disputes. Our findings<br/>further suggest that liberal judge ideology reduces firms’ R&amp;D investments and market value<br/>by constraining tax planning. Overall, our evidence highlights the importance of judge<br/>ideology to firm behavior in the context of corporate tax planning. <br/>