The Effect of Corporate Taxation and Ownership on Raising Shareholder Capital

37 Pages Posted: 1 Nov 2013

See all articles by Robert Krämer

Robert Krämer

Goethe University Frankfurt - Faculty of Economics and Business Administration

Vilen Lipatov

Cornerstone Research; CESifo

Date Written: October 31, 2013

Abstract

We analyze how interactions between corporate taxation and corporate governance affect shareholder capital. Using a model with strategic interaction between managers and outside shareholders, we hypothesize that, while an increase in the corporate tax rate decreases shareholder capital, an increase in tax enforcement attenuates this effect. The tax effect is less severe if firms have a more dispersed ownership structure. Empirically, using a large panel of European firm-level data, we find support for these hypotheses.

Keywords: corporate taxation, corporate governance, managerial diversion, shareholder capital, tax enforcement

JEL Classification: G320, H250, H260

Suggested Citation

Krämer, Robert and Lipatov, Vilen, The Effect of Corporate Taxation and Ownership on Raising Shareholder Capital (October 31, 2013). CESifo Working Paper Series No. 4436, Available at SSRN: https://ssrn.com/abstract=2348046 or http://dx.doi.org/10.2139/ssrn.2348046

Robert Krämer

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Grüneburgplatz 1
Frankfurt am Main, D-60323
Germany

Vilen Lipatov (Contact Author)

Cornerstone Research ( email )

1000 El Camino Real
Menlo Park, CA 94025-4327
United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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