How Does Quasi-Indexer Ownership Affect Corporate Tax-Planning?

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

Chen, Shuping and Huang, Ying and Li, Ningzhong and Shevlin, Terry J. and Shevlin, Terry J., How Does Quasi-Indexer Ownership Affect Corporate Tax-Planning? (May 15, 2018). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2610826 or http://dx.doi.org/10.2139/ssrn.2610826