Tax Evasion and Information Production: Evidence from the FATCA

67 Pages Posted: 31 Aug 2020 Last revised: 23 Jan 2023

See all articles by Si Cheng

Si Cheng

Syracuse University - Department of Finance

Massimo Massa

INSEAD - Finance

Hong Zhang

Singapore Management University, LKCSB; Tsinghua University - PBC School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 18, 2023

Abstract

We examine how tax evasion affects offshore information production. Using the Foreign Account Tax Compliance Act (FATCA) as an exogenous shock, we document that affected offshore asset management companies significantly enhance their performance as a response. This improvement comes from better information processing and is more substantial for tax-sensitive companies. Other policies related to fees and portfolio-based tax management are less affected. Our results reveal a novel substitution effect between tax evasion and information production, suggesting that curbing offshore tax evasion can help improve competitiveness and efficiency in the global asset management industry and related markets.

Keywords: tax evasion; FATCA; asset management; market efficiency

JEL Classification: F36, G15, G23, H26

Suggested Citation

Cheng, Si and Massa, Massimo and Zhang, Hong, Tax Evasion and Information Production: Evidence from the FATCA (January 18, 2023). PBCSF-NIFR Research Paper, Available at SSRN: https://ssrn.com/abstract=3683674 or http://dx.doi.org/10.2139/ssrn.3683674

Si Cheng (Contact Author)

Syracuse University - Department of Finance ( email )

Whitman School of Management
721 University Avenue
Syracuse, NY 13244
United States

HOME PAGE: http://si-cheng.net/

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Hong Zhang

Singapore Management University, LKCSB ( email )

469 Bukit Timah Road
Singapore
Singapore
(65)6828-9086 (Phone)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

HOME PAGE: http://www.hongzhang.info

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