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Opportunities to Divert, Firm Value, and Taxation: Theory and Evidence from European Firms

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Author Info

  • Robert Krämer
  • Vilen Lipatov

Abstract

We study the relationship between opportunities for managerial diversion, corporate tax system parameters, and the return on shareholder funds. Theoretically, in a simple game between corporate insiders and outsiders, higher costs of diversion increase the return. European firm-level data lend support to these results. Further, in civil-law countries an increase in the corporate tax rate has a positive effect on shareholder value, whereas in common-law countries it has a negative effect.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 68 (2012)
Issue (Month): 1 (March)
Pages: 17-47

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201203)68:1_17:otdfva_2.0.tx_2-9

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Related research

Keywords: corporate governance; corporate taxation;

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Cited by:
  1. Robert Krämer & Vilen Lipatov, 2013. "The Effect of Corporate Taxation and Ownership on Raising Shareholder Capital," CESifo Working Paper Series 4436, CESifo Group Munich.

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