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Public pressure and corporate tax behaviour

Author

Listed:
  • Scott D Dyreng

    () (Fuqua School of Business, Duke University)

  • Jeffrey L Hoopes

    () (Fisher School of Business, Ohio State University)

  • Jaron H Wilde

    () (Tippie College of Business, University of Iowa)

Abstract

We examine whether public pressure related to compliance with subsidiary disclosure rules influences corporate tax behaviour. ActionAid International, a non-profit activist group, levied public pressure on non-compliant UK firms in the FTSE 100 to comply with a rule requiring UK firms to disclose the location of all of their subsidiaries. We use this natural experiment to examine whether the public pressure led scrutinized firms to decrease tax avoidance and reduce the use of subsidiaries in tax haven countries relative to other firms in the FTSE 100 not affected by the public pressure. The evidence suggests that the public scrutiny sufficiently changed the costs and benefits of tax avoidance such that tax expense increased for scrutinized firms. The results suggest that public pressure from outside activist groups can exert a significant influence on the behaviour of large publicly-traded firms. Our findings extend prior research that has had little success documenting an empirical relation between public scrutiny of tax avoidance and firm behaviour.

Suggested Citation

  • Scott D Dyreng & Jeffrey L Hoopes & Jaron H Wilde, 2014. "Public pressure and corporate tax behaviour," Working Papers 1416, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:1416
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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