Beyond Tax Avoidance: Offshore Firms’ Institutional Environment and Financial Reporting
University of Iowa - Henry B. Tippie College of Business
University of Ottawa - School of Management
Concordia University - Department of Accountancy
CAAA Annual Conference 2009 Paper
AFA 2011 Denver Meetings Paper
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, M41working papers series
Date posted: January 5, 2010 ; Last revised: October 6, 2013
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.844 seconds