Corporate Governance and Tax Avoidance: Evidence from U.S. Cross-listing

55 Pages Posted: 25 Jun 2019 Last revised: 9 Nov 2020

See all articles by Ruiyuan (Ryan) Chen

Ruiyuan (Ryan) Chen

West Virginia University

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

He (Helen) Wang

West Virginia University - Department of Finance

Yang Yang

West Virginia University

Date Written: May 25, 2019

Abstract

Using a sample of cross-listed firms from 51 countries and a difference-in-differences approach that exploits corporate governance shocks induced by cross-listing in the U.S., we find that firms tend to engage in less tax avoidance after cross-listing. This effect is more pronounced for firms that experience significant improvements in corporate governance and for firms from countries with weaker shareholder protection and disclosure requirements. For cross-listed firms with improved corporate governance after cross-listing, tax avoidance activities pursued after cross-listing are positively associated with firm value. Taken together, the results indicate that cross-listing in the U.S. helps align the interests of managers and shareholders and reduces managerial diversion. This finding is consistent with the view that firm- and country-level corporate governance are important determinants of corporate tax-sheltering activities.

Keywords: cross-listing; tax avoidance; corporate governance; shareholder protection

JEL Classification: G21, G18, G32, G34, G35

Suggested Citation

Chen, Ruiyuan and El Ghoul, Sadok and Guedhami, Omrane and Wang, He and Yang, Yang, Corporate Governance and Tax Avoidance: Evidence from U.S. Cross-listing (May 25, 2019). Available at SSRN: https://ssrn.com/abstract=3409587 or http://dx.doi.org/10.2139/ssrn.3409587

Ruiyuan Chen

West Virginia University ( email )

1601 University Avenue
Morgantown, WV 26505
United States

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

He Wang

West Virginia University - Department of Finance ( email )

Morgantown, WV 26506
United States

Yang Yang

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

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