Cross-Border Investment, Deterrence, and Compliance Effects of Ownership Transparency

Abstract

We exploit the staggered adoption of beneficial ownership registers in the EU to study (i) whether and how the requirement to disclose information on an entity’s ultimate human owner (ownership transparency) shapes cross-border investment, (ii) whether ownership transparency deters “potentially illicit” versus “likely legitimate” activity, and (iii) which types of firms try to avoid ownership disclosure. We find that investment from non-EU financial havens into the EU declines significantly after countries adopt ownership registers. Public scrutiny and enforcement emerge as key factors shaping this decline. Further, potentially illicit actors do not appear to alter their investment behavior. Instead, they appear less likely to comply with the transparency regulation. Our findings provide insights relevant to regulation aimed at enhancing ownership transparency.

Keywords: ownership transparency, financial havens, cross-border investment, tax evasion

JEL Classification: D25, F23, H25, G34