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Corporate Tax Havens and Transparency

62 Pages Posted: 29 Mar 2015 Last revised: 7 Oct 2017

Morten Bennedsen

INSEAD - Economics and Political Sciences

Stefan Zeume

University of Michigan, Stephen M. Ross School of Business

Date Written: October 6, 2016

Abstract

We investigate shareholders’ reactions to the increased transparency of corporate tax haven activities in a hand-collected subsidiary data set covering 17,331 publicly listed firms in 52 countries. An increase in transparency through the staggered signing of bilateral tax information exchange agreements (TIEAs) between home countries and tax havens is associated with a 2.5% increase in the value of affected firms. The results are stronger for firms with more complex tax haven structures and weakly governed firms. Furthermore, firms that respond to TIEAs by haven hopping (i.e., they move subsidiaries from affected to non-affected tax havens) do not experience an increase in firm value. These results are consistent with tax havens being used for expropriation activities that extend beyond pure tax-saving activities.

Keywords: Tax havens, firm value, entrenchment, tax avoidance

JEL Classification: G32, G38, H25, H26

Suggested Citation

Bennedsen, Morten and Zeume, Stefan, Corporate Tax Havens and Transparency (October 6, 2016). Ross School of Business Paper No. 1272. Available at SSRN: https://ssrn.com/abstract=2586318 or http://dx.doi.org/10.2139/ssrn.2586318

Morten Bennedsen

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Stefan Zeume (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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