Abstract Purpose The purpose of this paper is to investigate whether companies that donate to winning electoral campaigns are more aggressive in terms of tax planning than companies that do not make these contributions. The relationship between politicians and companies may be signaled by political connections in which companies try to get political benefits in exchange for providing politicians with campaign financing. The hypothesis is that a quid pro quo occurs in which these companies benefit from favorable tax treatment that reduces their relative tax burden. Design/methodology/approach The focus of this study is donations that were made in the presidential elections of 2010 and 2014. The sample covers the period between 2010 and 2016 for companies listed on the B3 Stock Exchange, using proxies for tax aggressiveness computed based on value-added reporting. Through linear regressions, the authors have tested whether the companies that made these campaign contributions tend to have a lower tax burden. Findings The proposed hypothesis was confirmed, revealing that a political connection between campaign donations reduces the tax burden for donating companies during the years following the election. These donations appear to depict an environment characterized by an exchange of favors in which the donating companies exhibit greater tax aggressiveness than non-donating companies. Originality/value The current study deals with a subject that has not yet been examined empirically in Brazil and reinforces the position adopted by the Supreme Court in prohibiting campaign donations to inhibit quid pro quo practices. The study offers additional arguments for the criminalization of the so-called “second set of books” used to record electoral campaign contributions.

Abstract: This paper describes a study that analyses earnings management strategies involving accounting choices or real activities in Brazil. An analysis is conducted of the relationships between earnings management strategies their determinant costs and of the temporal sequence in which these management strategies are applied. The results of empirical tests indicate that adoption of management strategies is dependent on their relative costs. There is a temporal relationship between the two types of strategies for manipulation of year-end results, with real activities preceding accounting choices. It was also observed that the level of manipulation by accruals (real activities) reduced (increased) after adoption of the IFRS in Brazil.

Resumen: Este artículo describe un estudio que analiza las estrategias de manipuladoras de resultados que implican decisiones de contabilidad o actividades reales en Brasil. Se realiza un análisis de las relaciones entre las estrategias manipuladoras de resultados y los costos determinantes de la secuencia temporal en la que se aplican estas estrategias de manejo. Los resultados de las pruebas empíricas indican que la adopción de estrategias manipuladoras depende de sus costos relativos. Existe una relación temporal entre los dos tipos de estrategias para la manipulación de los resultados de fin de año, con actividades reales anteriores opciones de contabilidad. También se observó que el nivel de manipulación por parte de las acumulaciones (actividades reales) reducción (aumento) después de la adopción de las IFRS en Brasil.