The Impact Of Private Equity Ownership On Portfolio Firms? Corporate Tax Planning

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This paper investigates whether private equity (PE) firms influence the tax practices of their portfolio firms. Prior research documents that PE firms create economic value in portfolio firms through effective governance, financial, and operational engineering. Given PE firms' focus on value creation, the authors examine whether PE firms influence the extent and types of tax avoidance at portfolio firms as an additional source of economic value. They document that PE-backed portfolio firms engage in significantly more nonconforming tax planning and have lower marginal tax rates than other private firms.