Disclosure Regulation, Corruption, and Investment: Evidence from Natural Resource Extraction

Rauter, Thomas

doi:10.2139/ssrn.3049941

Cited by 22 publications

(20 citation statements)

References 60 publications

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“…Since the information was mostly unknown to tax authorities, this effect likely stems from additional scrutiny rather than reputational costs. Interestingly, the authors also find a significant reduction in commercial activities reported in deemed corrupt countries, similar to the real effects documented by Rauter (2020).…”

Section: Firm Reactions To Actual Disclosure Of Tax-related Informationsupporting

confidence: 73%

“…So far, only one study examines the effects of mandatory CbCR requirements imposed on extractive industries, which primarily focus on increasing transparency on the different kinds of payments between firms and governments. Exploiting the staggered introduction of such regimes in Europe and Canada, Rauter (2020) shows that disclosing companies increase their payments to host governments by roughly 12%. In cross-sectional tests, he finds the effects to be stronger among firms that face higher reputational risks, suggesting that the disclosure requirements imposed reputational costs on affected firms.…”

Section: Public Tax Disclosure Regimesmentioning

confidence: 99%

“…While the disclosure requirement for banks is designed to assess whether they pay a "fair share" of taxes in each country, the obligation for the extractive industries primarily aims at fighting corruption in this sector. As the real effects documented by Rauter (2020) suggest, the large stock price drop for the extractive industries may be driven by investors' expectation that reduced opportunities of corruption will render resource extraction costlier for the affected firms. This is also in line with O'Donovan et al (2019), showing that firms exposed to corrupt countries experience more negative investor reactions to the Panama Papers.…”

Section: Investor Reactions To Increases In Tax Transparencymentioning

confidence: 99%

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On the Determinants and Effects of Corporate Tax Transparency: Review of an Emerging Literature

Müller¹,

Spengel²,

Vay³

2020

SSRN Journal

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In response to discussions about large multinational enterprises' tax planning activities, legislators around the world have adopted numerous regulations to increase corporate tax transparency. New settings and datasets have spurred empirical research in recent years. Our paper presents a review of this emerging literature on corporate tax transparency. To this end, we first propose a framework to structure the diverse landscape of tax-related disclosures. Second, we elaborate on the conceptual underpinnings of tax transparency by drawing on established theories from financial accounting and CSR reporting research. Third, we survey empirical evidence on corporate tax transparency. We classify the findings into (i) determinants of firms' tax disclosure decisions, (ii) informativeness of different kinds of tax-related disclosure, and (iii) effects of increased tax transparency on firms and their stakeholders. Finally, we synthesize the main inferences and offer suggestions for future research.

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Section: Firm Reactions To Actual Disclosure Of Tax-related Informationsupporting

confidence: 73%

Section: Public Tax Disclosure Regimesmentioning

confidence: 99%

Section: Investor Reactions To Increases In Tax Transparencymentioning

confidence: 99%

See 1 more Smart Citation

On the Determinants and Effects of Corporate Tax Transparency: Review of an Emerging Literature

Müller¹,

Spengel²,

Vay³

2020

SSRN Journal

View full text Add to dashboard Cite

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“…For banks, however, this channel does not apply (and is not targeted by the legislators). In a synopsis, the findings of Johannesen & Larsen (2016), Rauter (2017) and our study suggest that the reporting requirement introduced for the extractive industries was anticipated by investors to be efficient in raising companies' payments to resource-rich countries. The CbCR rule implemented for EU financial institutions, however, was not expected by investors to reduce banks' tax avoidance opportunities or to come along with substantial reputational costs.…”

Section: Interim Conclusionmentioning

confidence: 68%

Increasing tax transparency: investor reactions to the country-by-country reporting requirement for EU financial institutions

Dutt

Ludwig

Nicolay

et al. 2019

Int Tax Public Finance

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We employ an event study methodology to investigate the stock price reaction around the day of the political decision to include a country-by-country reporting obligation for EU financial institutions. We do not find significant abnormal returns for the banks affected. Sample splits according to the effective tax rate and the degree of B2C orientation do not reveal a more pronounced negative investor response for banks engaging more strongly in tax avoidance or being potentially more concerned about reputational risks, respectively. We conclude that the implementation of a CbCR requirement for EU financial institutions did not trigger a noticeable investor response. Contrary prior findings regarding other public tax disclosure obligations might be driven by the distinct motivation of the rules and the way the information is presented. We contend that capital market reactions to an upcoming increase in tax transparency are not generalizable to other industries and settings, but that consideration must be given to the context and the exact design of the rule.

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“…In contrast to the possibly dysfunctional effects of mandated disclosures, other studies have pointed to beneficial real effects (Fu, Kraft, and Zhang [], Cho [], Dyreng, Hoopes, and Wilde [], Christensen et al. [], Balakrishnan and Ertan [], Rauter []) . Chen [] contributes to the “real effects” literature by examining the impact of mandated disclosures on acquisitions.…”

Section: The Sec's Mandated Disclosuresmentioning

confidence: 99%

The Role of Gatekeepers in Capital Markets

Roychowdhury

Srinivasan

2019

J of Accounting Research

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Gatekeepers in financial markets have the power to provide the institutional stability, fortitude, and direction necessary for the development and the smooth functioning of capital markets. At the same time, they are often motivated by their own private incentives. This along with the tradeoffs they face, and the at-times unintended consequences of the regulations they propose and enforce, can undermine their effectiveness. A thorough understanding of gatekeepers and their roles can thus illuminate academics, the financial community, and regulators on how such gatekeepers can be the most effective and generate the greatest benefits for capital markets. Since gatekeeping roles and the literature they have inspired encompass a wide array of institutions and agencies, our overview concentrates on those that the conference papers appearing in this volume focus on. We conclude that collectively, the papers contribute to significant progress, and point out some crucial areas that call for further investigation and offer opportunities for future research.

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Disclosure Regulation, Corruption, and Investment: Evidence from Natural Resource Extraction

Cited by 22 publications

References 60 publications

On the Determinants and Effects of Corporate Tax Transparency: Review of an Emerging Literature

On the Determinants and Effects of Corporate Tax Transparency: Review of an Emerging Literature

Increasing tax transparency: investor reactions to the country-by-country reporting requirement for EU financial institutions

The Role of Gatekeepers in Capital Markets

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