How Does Quasi-Indexer Ownership Affect Corporate Tax-Planning?
54 Pages Posted: 27 May 2015 Last revised: 4 Jun 2018
Date Written: May 15, 2018
Appendix is available at: https://ssrn.com/abstract=3182601
We study whether, and more importantly, through what mechanisms, quasi-indexers affect portfolio firms’ tax planning by employing the discontinuity in quasi-indexer ownership around the Russell 1000/2000 index cutoff. Using a regression discontinuity design, we find that higher quasi-indexer ownership leads to greater tax saving. With respect to the mechanisms, we find that the greater tax saving is a result of a focus on improved overall firm performance, not a specific focus on improved tax planning. We further find that the documented tax saving effect is partially due to quasi-indexers’ influences on executive equity incentives, corporate governance, and information environment.
Keywords: tax planning; quasi-indexer; Russell Index assignment; regression discontinuity
JEL Classification: G32, H26
Suggested Citation: Suggested Citation