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The Effect of Corporate Taxation and Ownership on Raising Shareholder Capital

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  • Robert Krämer
  • Vilen Lipatov

Abstract

We analyze how interactions between corporate taxation and corporate governance affect shareholder capital. Using a model with strategic interaction between managers and outside shareholders, we hypothesize that, while an increase in the corporate tax rate decreases shareholder capital, an increase in tax enforcement attenuates this effect. The tax effect is less severe if firms have a more dispersed ownership structure. Empirically, using a large panel of European firm-level data, we find support for these hypotheses.

Suggested Citation

  • Robert Krämer & Vilen Lipatov, 2013. "The Effect of Corporate Taxation and Ownership on Raising Shareholder Capital," CESifo Working Paper Series 4436, CESifo.
    • Handle: RePEc:ces:ceswps:_4436
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    More about this item

    Keywords

    corporate taxation; corporate governance; managerial diversion; shareholder capital; tax enforcement;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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