Abstract

http://ssrn.com/abstract=1325895
 
 

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Beyond Tax Avoidance: Offshore Firms’ Institutional Environment and Financial Reporting


Art Durnev


University of Iowa - Henry B. Tippie College of Business

TieMei Li


University of Ottawa - School of Management

Michel Magnan


Concordia University - Department of Accountancy

September 2013

CAAA Annual Conference 2009 Paper
AFA 2011 Denver Meetings Paper

Abstract:     
We explore how firms’ operations in Offshore Financial Centers (OFCs), either through direct registration or through subsidiaries, affect the quality of financial reporting. Using a large unique sample of firm-year observations from 18 OFCs and from 15 countries with subsidiaries in OFCs, this study documents a negative association between financial reporting quality and firms’ offshore operations. We also find that as the offshore characteristics become more prevalent, firms are more likely to manage earnings through both accruals and real activities. Furthermore, we provide evidence that U.S. firms with OFC subsidiaries exhibit poorer financial reporting quality than U.S. firms with solely domestic operations while U.S. firms with non-OFC foreign subsidiaries do not. Thus, the assessment of a firm’s institutional environment must encompass the registration status of its subsidiaries as well as its own.

Number of Pages in PDF File: 60

Keywords: Offshore Financial Centers, Financial Reporting, Earnings Management

JEL Classification: F36, G15, G34, H26, K22, M41

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Date posted: January 5, 2010 ; Last revised: October 6, 2013

Suggested Citation

Durnev, Art and Li, TieMei and Magnan, Michel, Beyond Tax Avoidance: Offshore Firms’ Institutional Environment and Financial Reporting (September 2013). CAAA Annual Conference 2009 Paper; AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1325895 or http://dx.doi.org/10.2139/ssrn.1325895

Contact Information

Artyom Durnev
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)
HOME PAGE: http://www.artdurnev.com
TieMei Li (Contact Author)
University of Ottawa - School of Management ( email )
136 Jean-Jacques Lussier Street
Ottawa, Ontario K1N 6N5
Canada
Michel Magnan
Concordia University - Department of Accountancy ( email )
Montreal, Quebec H3G 1M8
Canada
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