The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad

Journal of Accounting Research, Volume 58, Issue 5

Posted: 15 Mar 2021

See all articles by Thomas Rauter

Thomas Rauter

University of Chicago - Booth School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2020

Abstract

I examine how mandatory extraction payment disclosures (EPD)—a policy solution intended to discourage corporate payment avoidance in the oil, gas, and mining industries—affect fiscal revenue contributions and investments by multinational firms in foreign host countries. Using the staggered adoption of EPD across firms headquartered in Europe and Canada, I find that disclosing companies increase their payments to host governments, decrease investments, and obtain fewer extraction licenses relative to non‐disclosing competitors. These effects are stronger for firms that face a high risk of public shaming, operate in corrupt host countries, and have a high exposure to bribery‐prone payments, suggesting that EPD increases the reputational cost of corporate behavior that could be perceived as exploitative. The resulting reallocation of investments from disclosing to non‐disclosing firms reduces drilling productivity and resource production in host countries, consistent with uneven disclosure regulation distorting capital allocation.

Keywords: eal effects; disclosure regulation; fiscal revenues; foreign investment; resource allocation; reputational cost

JEL Classification: G14, G38, H20, H26, K22, L71, M41, M48, O47

Suggested Citation

Rauter, Thomas, The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad (December 1, 2020). Journal of Accounting Research, Volume 58, Issue 5, Available at SSRN: https://ssrn.com/abstract=3803462

Thomas Rauter (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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