Arbeitspapier
How do investors value the publication of tax information? Evidence from the European public country-by-country reporting
We examine the capital market reaction to the announcement of the European Union (EU) to introduce a public tax country-by-country reporting (CbCR) regime. By employing an event study methodology, we find a significant cumulative average abnormal return (CAAR) of -0.699%, which translates into a monetary value drop of approximately EUR 65 billion. We conclude that investors evaluate reputational risks arising from public scrutiny and competitive disadvantages to outweigh potential benefits of an extended information environment or more sustainable corporate tax strategies. In cross-sectional tests, we find that the average investor reaction is more pronounced for firms with low effective book tax rates, indicating that reputational concerns play a significant role in the marginal investor's investment behavior. Furthermore, our cross-sectional results indicate that the market reaction is stronger for firms operating in industries with high growth in market participants, providing an initial indication for the role of the competitive environment as an additional channel. Our inferences are of particular importance in light of the current ongoing debates on similar disclosure rules (particularly in the United States; cf. "Disclosure of Tax Havens and Offshoring Act") as well as for sustainability standard setters.
- Language
-
Englisch
- Bibliographic citation
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Series: ZEW Discussion Papers ; No. 21-077
- Classification
-
Wirtschaft
Multinational Firms; International Business
Information and Market Efficiency; Event Studies; Insider Trading
Corporate Finance and Governance: Government Policy and Regulation
Business Taxes and Subsidies including sales and value-added (VAT)
Tax Evasion and Avoidance
Accounting
- Subject
-
tax transparency
tax disclosure
tax avoidance
event study
country-by-country reporting
- Event
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Geistige Schöpfung
- (who)
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Müller, Raphael
Spengel, Christoph
Weck, Stefan
- Event
-
Veröffentlichung
- (who)
-
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
- (where)
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Mannheim
- (when)
-
2021
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Müller, Raphael
- Spengel, Christoph
- Weck, Stefan
- ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Time of origin
- 2021
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Is mandatory country-by-country reporting effective? Early evidence on the economic responses by multinational firms
Leveling the playing field? A qualitative and quantitative examination of the EU directive on public country-by-country reporting
Der EU-Vorschlag zum Country-by-Country Reporting im Internet: Kosten, Nutzen, Konsequenzen
Effective marginal tax rates for US investors in Germany and Europe : an analysis of recent tax reforms in Germany
The effective tax burden of companies in the member states of the EU : the perspective of a multinational investor
The common consolidated corporate tax base
Cross-border tax evasion after the common reporting standard: Game over?
Comment in response to the public consultation paper issued by the European Commission on 28th January 2011 on taxation problems that arise when dividends are distributed across borders to individual investors and possible solutions
The EU proposal for country-by-country reporting on the internet: Costs, Benefits and Consequences
Country-by-country reporting: Tension between transparency and tax planning
Transparency in financial reporting: Is country-by-country reporting suitable to combat international profit shifting?
Reporting behavior and transparency in European banks' country-by-country reports
Is mandatory country-by-country reporting effective? Early evidence on the economic responses by multinational firms
Leveling the playing field? A qualitative and quantitative examination of the EU directive on public country-by-country reporting
Der EU-Vorschlag zum Country-by-Country Reporting im Internet: Kosten, Nutzen, Konsequenzen
Effective marginal tax rates for US investors in Germany and Europe : an analysis of recent tax reforms in Germany
The effective tax burden of companies in the member states of the EU : the perspective of a multinational investor
The common consolidated corporate tax base
Cross-border tax evasion after the common reporting standard: Game over?
Comment in response to the public consultation paper issued by the European Commission on 28th January 2011 on taxation problems that arise when dividends are distributed across borders to individual investors and possible solutions
The EU proposal for country-by-country reporting on the internet: Costs, Benefits and Consequences
Country-by-country reporting: Tension between transparency and tax planning
Transparency in financial reporting: Is country-by-country reporting suitable to combat international profit shifting?
Reporting behavior and transparency in European banks' country-by-country reports
Is mandatory country-by-country reporting effective? Early evidence on the economic responses by multinational firms
Leveling the playing field? A qualitative and quantitative examination of the EU directive on public country-by-country reporting
Der EU-Vorschlag zum Country-by-Country Reporting im Internet: Kosten, Nutzen, Konsequenzen
Effective marginal tax rates for US investors in Germany and Europe : an analysis of recent tax reforms in Germany
The effective tax burden of companies in the member states of the EU : the perspective of a multinational investor
The common consolidated corporate tax base
Cross-border tax evasion after the common reporting standard: Game over?