The effects of tax evasion and the inefficiency of the legal system on firms’ financial constraints: are they complements or substitutes?
AbstractThis paper analyzes the joint impact of tax evasion and the inefficiency of the legal system on firms’ financial constraints. We find that both variables have a statistically significant effect on the difficulties that firms encounter when trying to access financing and this effect is nonlinear. In particular, tax evasion and the inefficiency of the legal system are substitute as they mitigate each other’s effects on firms’ credit constraints. It means that the negative impact of tax evasion on financial constraints faced by firms decreases in the presence of a lower efficiency of the legal system.
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Bibliographic InfoPaper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1207.
Length: 18 pages
Date of creation: 2012
Date of revision: 2012
Financial constraints; Tax evasion; Legal system efficiency.;
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- G3 - Financial Economics - - Corporate Finance and Governance
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-04-17 (Accounting & Auditing)
- NEP-ALL-2012-04-17 (All new papers)
- NEP-IUE-2012-04-17 (Informal & Underground Economics)
- NEP-PBE-2012-04-17 (Public Economics)
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