IDEAS home Printed from https://ideas.repec.org/p/fmg/fmgdps/dp705.html

Transparency, Tax Pressure and Access to Finance

Author

Listed:
  • Andrew Ellul
  • Tullio Jappelli
  • Marco Pagano
  • Fausto Panunzi

Abstract

In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model’s predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms.

Suggested Citation

  • Andrew Ellul & Tullio Jappelli & Marco Pagano & Fausto Panunzi, 2012. "Transparency, Tax Pressure and Access to Finance," FMG Discussion Papers dp705, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp705
    as

    Download full text from publisher

    File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/dp705.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fmg:fmgdps:dp705. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The FMG Administration (email available below). General contact details of provider: http://www.lse.ac.uk/fmg/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.