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Taxation and Corporate Governance: An Economic Approach

24 Pages Posted: 3 May 2007  

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Dhammika Dharmapala

University of Chicago Law School

Date Written: April 2007

Abstract

How do the tax system and corporate governance arrangements interact? This chapter begins by reviewing an emerging literature that explores how agency problems create such interactions and provides evidence on their importance. This literature has neglected how taxation can interact with the various mechanisms that have arisen to ameliorate the corporate governance problem, such as concentrated ownership, accounting and information systems, high-powered incentives, financing choices, payout policy, and the market for corporate control. The remainder of the chapter outlines potentially fruitful areas for future research into how these mechanisms may respond to the tax system.

Keywords: Taxes, tax avoidance, tax shelters, governance, firm value

JEL Classification: G32, H25, H26, K34

Suggested Citation

Desai, Mihir A. and Dharmapala, Dhammika, Taxation and Corporate Governance: An Economic Approach (April 2007). Available at SSRN: https://ssrn.com/abstract=983563 or http://dx.doi.org/10.2139/ssrn.983563

Mihir A. Desai

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

Dhammika Dharmapala (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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