Title

Institutional Ownership And Corporate Political Activity In The Insurance Industry: Ethical Considerations For Accountants

Abstract

In this study, we extend prior research on institutional ownership by investigating the relationship between the presence and concentration of institutional owners and the political activity of insurance companies during the development and passage of the United States' Taxpayer Relief Act of 1997. We rely on prior research on both institutional ownership (Kochhar & David, 1996; Wahal, 1996; David, Hitt, & Insead, 2001) and corporate political activity (Hillman & Hitt, 1999; Freed & Swenson, 1995) to motivate our study and develop our empirical models. Our study provides initial evidence of the association between institutional ownership and corporate political activity. In particular, the observed positive relationship between institutional ownership and levels of corporate political activity are consistent with the active investor view of institutional owners. We argue that there are related ethical considerations for accountants concerning these activities. For example, accountants should be concerned with the extent to which performance demands of institutional owners pressure them to consider or make questionable decisions regarding their involvement in political activities. Accountants and accounting policymakers should have similar concerns in regard to the extent to which their corporate political activity regarding tax law benefits their shareholders to the detriment of the broader society. Furthermore, the results of this study add to accountants' understanding of the political process, helping to improve corporate decision making. © Emerald Group Poblishing Limited.

Publication Date

1-1-2007

Publication Title

Research on Professional Responsibility and Ethics in Accounting

Volume

12

Number of Pages

23-46

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/S1574-0765(07)00202-6

Socpus ID

84901432238 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84901432238

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