Incorporation in Offshore Financial Centers: Naughty or Nice?
70 Pages Posted: 21 Nov 2013 Last revised: 9 Apr 2019
Date Written: April 2, 2019
We study the associations between law and finance in a novel setting using listed firms incorporated in offshore financial centers (OFCs). OFC incorporation can offer an efficient legal and regulatory environment or it can facilitate expropriation by managers and controlling shareholders. Our empirical evidence shows that Tobin’s q, value of cash, and institutional holdings are typically lower for OFC incorporated firms, but, as suggested by our model, consequences vary widely with the firm’s individual and home country characteristics. These findings are upheld by our identification strategy centered on legal, regulatory, and enforcement events in home, listing, and OFC countries.
Keywords: Offshore financial center, law and finance, corporate governance, regulatory arbitrage
JEL Classification: F21, F38, G15, G34
Suggested Citation: Suggested Citation