Media coverage and corporate tax burden in Spain

Abstract

This research examines the relationship between media coverage and corporate tax burden in a sample of non-financial Spanish listed firms over the period 2003-2016. We show that media coverage reduces corporate tax burden. Our findings are consistent with a legitimation role for the media in continental Europe, such that firms subject to greater media attention show less need to resort to tax policy in order to legitimate corporate behaviour. Further analysis shows that companies subject to greater media coverage combined with a more negative tone of news show a higher tax burden. Thus, when the media threaten the legitimation of corporate behaviour, the firm will thus show a greater tendency to use tax policy as a way to restore corporate legitimation.