50 Pages Posted: 28 Apr 2016 Last revised: 14 Aug 2017
Date Written: April 19, 2016
We use the data leak of the Panama Papers on April 3, 2016 to study whether and how the use of offshore shelters affects firm value. We find that the leak erases $135 billion in market capitalization among 397 public firms that we trace as users of offshore vehicles exposed in the leak. These firms use offshore vehicles to finance corruption and aggressively avoid taxes, which increases firm value, but also to expropriate shareholders. Firms implicated by the leak consequently show lower sales from perceptively corrupt regions and lower tax aggressiveness. On net, offshore sheltering enhances firm value by promoting potentially illegal activities that go beyond tax avoidance. Offshore service providers facilitate such activities.
Keywords: Panama Papers, tax havens, offshore vehicle, corruption, tax evasion
JEL Classification: G32, G38, H25, H26
Suggested Citation: Suggested Citation
O'Donovan, James and Wagner, Hannes F. and Zeume, Stefan, The Value of Offshore Secrets – Evidence from the Panama Papers (April 19, 2016). Available at SSRN: https://ssrn.com/abstract=2771095
By Alex Edmans