We investigate the relationship between government deficits and corporate tax avoidance. We propose three channels through which government deficits can affect corporate tax avoidance, including (i) perceptions of expected tax enforcement, (ii) managers’ sense of civic duty, and (iii)...

We investigate how government deficits affect corporate-tax avoidance. We find that deficits are positively associated with corporate-tax avoidance, consistent with a deterioration in the government’s finances leading to expectations of weaker tax enforcement or future tax increases. To...

Fiscal deficits represent an important variable for banks' aggregate credit risk, revealing governments' ability to curb banks' losses in bad states, either with direct cash infusions or with macroeconomic stabilization policies. Deteriorating deficits are associated with increasing financial...