Corporate taxes, partisan politics, and stock returns

Javier Mella*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper studies the effect of partisan politics on stock returns in the U.S. by exploring different measures of corporate taxes. The results support the partisan politics cycle effect on equity returns. The cross-sectional analysis shows that the measures of corporate taxes impact stock returns but only when interacting with partisanship. Moreover, the time-series analysis shows that an investment strategy based on these results provides abnormal returns and that investors only partially anticipate them. The findings are consistent with a cash-flow-based explanation, in contrast with a risk-based explanation, and highlight the relevance of the political orientation of the governments in explaining the variation of stock returns.

Original languageEnglish
Article number102119
Pages (from-to)1-19
Number of pages19
JournalNorth American Journal of Economics and Finance
StatePublished - May 2024

Bibliographical note

Publisher Copyright:
© 2024 Elsevier Inc.


  • Asset pricing
  • Corporate taxes
  • Partisan politics
  • Political cycles
  • Stock market


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