Tax Avoidance Regulations and Stock Market Responses

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)

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Detail(s)

Original languageEnglish
Publication statusPublished - 21 Aug 2020

Conference

Title76th Annual Congress of the International Institute of Public Finance (IIPF 2020)
Locationonline
PlaceIceland
CityReykjavík
Period19 - 21 August 2020

Abstract

In this paper we examine the effects of anti-tax avoidance regulations on stock returns and systematic risk exposure of multinational corporations (MNCs). We use the introduction of the worldwide debt cap reform in 2010 in the UK as a quasi-natural experiment that limited the extent of profit shafting for a group of multinational firms. We find that multinationals affected by the reform are associated with higher raw returns and lower UK market risk exposure than unaffected MNCs after the reform. This is consistent with the evidence that multinational firms move debt and real operations away from the UK in response to the reform thereby minimizing the effects of anti-tax avoidance regulation on their overall tax payments. Our results suggest that the observed debt shifting behavior signals the MNCs' competency to perform tax planning and investors reward it and perceive these firms as valuable investment.

Citation Format(s)

Tax Avoidance Regulations and Stock Market Responses. / Bilicka, Katarzyna; Qi, Yaxuan; Shang, Danjue.

2020. Paper presented at 76th Annual Congress of the International Institute of Public Finance (IIPF 2020), Reykjavík, Iceland.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)