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Market reaction to private Country-by-Country Reporting

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  • Gabanatlhong, Bathusi

Abstract

This paper provides the first empirical evidence of how stock markets respond to private Country-by-Country Reporting (CbCR), a regulation promoting tax transparency. Using an event study, the analysis focuses on African stock markets in countries that are signatories to the Multilateral Competent Authority Agreement (CbC MCAA). The findings reveal a stock price decline for firms subject to CbCR, particularly those with aggressive tax practices, reflecting investor concerns over reduced profit-shifting opportunities. Cross-listed firms experience positive stock price reactions in foreign markets due to expectations of improved corporate governance. In contrast, non-cross-listed firms face negative reactions in domestic markets, driven by heightened tax enforcement risks. These results emphasise the influence of private tax disclosure on market sentiment and its potential to deter aggressive tax avoidance.

Suggested Citation

  • Gabanatlhong, Bathusi, 2025. "Market reaction to private Country-by-Country Reporting," Economic Modelling, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:ecmode:v:152:y:2025:i:c:s026499932500241x
    DOI: 10.1016/j.econmod.2025.107246
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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