The Value of Offshore Secrets – Evidence from the Panama Papers

50 Pages Posted: 28 Apr 2016 Last revised: 14 Aug 2017

James O'Donovan

INSEAD

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Stefan Zeume

University of Michigan, Stephen M. Ross School of Business

Date Written: April 19, 2016

Abstract

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

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

James O'Donovan

INSEAD ( email )

1 Ayer Rajah Avenue
138676 Singapore, 138676
Singapore

Hannes F. Wagner (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://faculty.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Stefan Zeume

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

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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