Olbert, M and De Simone, L (2022) Real Effects of Private Country-by-Country Disclosure. Accounting Review, 97 (6). pp. 201-232. ISSN 0001-4826
Abstract
We investigate the effects of mandatory private Country-by-Country Reporting (CbCR) to European tax authorities on multinational firms’ capital and labor investments as well as their organizational structures. We exploit the threshold-based application of this 2016 disclosure rule to conduct difference-in-differences and regression discontinuity tests. We document increases in capital and labor expenditures in Europe, but these effects are more pronounced in countries with preferential tax regimes. Cross-sectional tests and analysis using consolidated financial data provide evidence consistent with multinational firms reallocating capital across Europe to mitigate increased tax enforcement risk, as well as with CbCR hindering capital investment efficiency. We also find evidence consistent with firms responding to CbCR by reducing organizational complexity. Collectively, our results support the conclusion that mandatory private CbCR causes firms to change real investment activities to substantiate their tax avoidance activities in Europe while reducing the appearance of aggressive tax practices.
More Details
Item Type: | Article |
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Subject Areas: | Accounting |
Additional Information: |
© 2022 American Accounting Association |
Date Deposited: | 11 Jan 2022 08:21 |
Date of first compliant deposit: | 11 Jan 2022 |
Subjects: |
Europe Disclosure of financial information Corporation taxes |
Last Modified: | 05 Nov 2024 02:50 |
URI: | https://lbsresearch.london.edu/id/eprint/2195 |