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Do tax havens create firm value?

Author

Listed:
  • Siu Kai Choy
  • Tat-Kei Lai

    (LEM - Lille économie management - LEM - UMR 9221 - Université de Lille - UCL - Université catholique de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Travis Ng

Abstract

On October 11, 2011, a non-governmental organization called ActionAid published a report condemning the FTSE 100 firms for holding an unusually large number of subsidiaries in tax havens. Urging the government to implement appropriate actions, the report raised the firms' costs of holding tax haven subsidiaries. After this event, the stock prices of the nonfinancial firms experienced a 0.9% abnormal drop (corresponding to about £ 9 billion in market capitalization). Those better-governed firms and those with larger shares of subsidiaries in tax havens experienced larger drops. We find some evidence that government scrutiny, reputation, and investor sentiment were plausible channels of such a negative impact.

Suggested Citation

  • Siu Kai Choy & Tat-Kei Lai & Travis Ng, 2017. "Do tax havens create firm value?," Post-Print hal-01533521, HAL.
  • Handle: RePEc:hal:journl:hal-01533521
    DOI: 10.1016/j.jcorpfin.2016.10.016
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01533521
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    More about this item

    Keywords

    Tax havens; Firm value; Corporate governance; Corporate tax; Event study;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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