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

Rauter, Thomas

doi:10.1111/1475-679x.12332

Cited by 107 publications

(45 citation statements)

References 74 publications

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“…This expectation of managers' behavioral response to transparency is in accordance with related work on public CbCR of European resource‐extracting companies (Rauter 2020). Nevertheless, the benefit of additional information to assess international tax avoidance is disputable.…”

Section: Institutional Background and Theoretical Developmentsupporting

confidence: 85%

Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

Overesch

Wolff

2021

Contemporary Accting Res

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We analyze the effect of mandatory financial transparency on corporate tax avoidance. The effectiveness of comprehensive tax transparency, in the form of a public country‐by‐country reporting, to mitigate corporate tax planning is largely unknown. Capital Requirements Directive IV by the European Commission required multinational banks to publish key financial and tax data in the form of public country‐by‐country reporting. We examine tax avoidance of banks around the reform. Our focus is on multinational banks newly required to report activities in tax havens that had not been publicly disclosed before the country‐by‐country reporting mandate. We predict and find that these exposed banks increased their tax expense relative to multinational banks with no activities in tax havens to disclose, as well as relative to domestic banks unaffected by the new mandate. In additional tests, we compare our sample of exposed multinational banks to several control groups from the financial sector and other industries. Our results suggest that country‐by‐country reporting can serve as an additional policy instrument to curb corporate tax avoidance, but only when the reporting exposes the firms' tax sheltering activities to public scrutiny.

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Section: Institutional Background and Theoretical Developmentsupporting

confidence: 85%

Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

Overesch

Wolff

2021

Contemporary Accting Res

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“…One of the stipulated goals of the mandates is to impose transparency to curb this kind of behavior. Rauter ( 2020 ) examines the effects of the disclosure mandates and finds that disclosing firms pay higher prices for extraction rights, decrease investments, and obtain fewer extraction licenses relative to unregulated competitors. The effects are stronger for firms that face a high risk of public shaming, operate subsidiaries in corrupt host countries, or have high exposure to payments that are more vulnerable to bribery.…”

Section: Potential Firm Responses and Real Effects From Mandatory Csr Reporting Standardsmentioning

confidence: 99%

“…Such evidence in the CSR literature is still sparse, but the concern about avoidance strategies is nevertheless relevant. For instance, Rauter ( 2020 ) shows that oil, gas, and mining firms reduce their investments in response to mandatory extraction payment disclosures, but also finds evidence of reallocation of investments from disclosing firms to firms in jurisdictions without such regulation. These shifts come at the cost of reducing drilling productivity in the host countries, suggesting that uneven disclosure regulation in an industry can distort capital allocation.…”

Section: Potential Firm Responses and Real Effects From Mandatory Csr Reporting Standardsmentioning

confidence: 99%

Mandatory CSR and sustainability reporting: economic analysis and literature review

2021

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This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We first outline key features of CSR reporting. Next, we draw on relevant academic literatures in accounting, finance, economics, and management to discuss and evaluate the potential economic consequences of a requirement for CSR and sustainability reporting for U.S. firms, including effects in capital markets, on stakeholders other than investors, and on firm behavior. We also discuss issues related to the implementation and enforcement of CSR and sustainability reporting standards as well as two approaches to sustainability reporting that differ in their overarching goals and materiality standards. Our analysis yields a number of insights that are relevant for the current debate on mandatory CSR and sustainability reporting. It also points scholars to avenues for future research.

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“…Our findings contribute most directly to the literature on anti-corruption regulation. Most prior work focuses on foreign corruption regulation's impact on the operations of multinational corporations (e.g., Graham 1984, Beck et al 1991Hines 1995;Rauter 2020;.…”

mentioning

confidence: 99%

Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development

Christensen

Rauter

2020

SSRN Journal

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We examine whether foreign corruption regulation reduces corruption and increases the local economic benefits of resource extraction. After a mid-2000s increase in enforcement of the US Foreign Corrupt Practices Act (FCPA), economic activity (measured by nighttime luminosity) increases by 14% (3%) in African communities within a 10-(25-) kilometer radius of resource extraction facilities whose owners are subject to the FCPA. Local perceptions of corruption decline by 8%. Consistent with changes in existing extraction firms' business practices contributing to the increase in development, the association between resource production, instrumented by world commodity prices, and local economic activity increases by 40%.

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

Abstract: I examine how mandatory extraction payment disclosures (EPD)-a policy solution intended to discourage corporate payment avoidance in the oil, gas,

Cited by 107 publications

References 74 publications

Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

Financial Transparency to the Rescue: Effects of Public Country‐by‐Country Reporting in the European Union Banking Sector on Tax Avoidance*

Mandatory CSR and sustainability reporting: economic analysis and literature review

Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development

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