Accounting Policy Choice: The Relationship Between Corporate Tax Burdens and Company Size

Whilst there have been a number of papers that test the Watts and Zimmerman positive accounting hypotheses in a UK setting, no similar test has been made of the size effect using corporate tax burdens as a proxy for political costs. Using data for 5,998 year‐ends from 1968 to 1993 this paper finds that: during 1968–79 there is evidence of a size effect; in a number of years a negative association between firm size and tax burden exists; and of the five industry categories examined, the ‘mineral extractive’ industry had the highest tax burden throughout the period 1968–1979.