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Corporate governance, tax evasion and business cycles

Author

Listed:
  • Gilbert Mbaraa

    () (Faculty of Economic Sciences, University of Warsaw)

  • Ryszard Kokoszczyński

    (Faculty of Economic Sciences, University of Warsaw, Narodowy Bank Polski)

Abstract

We develop an agency model of corporate tax evasion and auditing by a residual claimant government and embed it to a macroeconomic environment characterised by credit constraints. In our economy, tax auditing by the government reduces the information asymmetry between lenders and entrepreneurs with an investment opportunity. Corporate governance quality consequently affects macroeconomic variables; with changes in tax rates, auditing and quality of corporate governance having aggregate effects. We show that changes in the revenue system; tax and audit rates, can directly affect asset prices and inflate the effects of exogenous shocks to the economy.

Suggested Citation

  • Gilbert Mbaraa & Ryszard Kokoszczyński, 2018. "Corporate governance, tax evasion and business cycles," Working Papers 2018-10, Faculty of Economic Sciences, University of Warsaw.
  • Handle: RePEc:war:wpaper:2018-10
    as

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    File URL: https://www.wne.uw.edu.pl/index.php/download_file/4176/
    File Function: First version, 2018
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    References listed on IDEAS

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    More about this item

    Keywords

    corporate governance; credit constraints; taxation; asset pricing; tax evasion; agency problem;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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