Real Effects of Private Country-by-Country Disclosure

Lisa De Simone, Marcel OlbertAccounting税务研究UTD24

The Accounting Review2021-12-20The University of Texas at Austin; London Business SchoolDOI

Citations128

ABSTRACT We investigate the effects of mandatory private Country-by-Country Reporting (CbCR) to European tax authorities on multinational firms' capital and labor investments, as well as their organizational structures. We exploit the threshold-based application of this 2016 disclosure rule to conduct difference-in-differences and regression discontinuity tests. We document increases in capital and labor expenditures in Europe, but these effects are more pronounced in countries with preferential tax regimes. Cross-sectional tests and analysis using consolidated financial data provide evidence consistent with multinational firms reallocating capital across Europe to mitigate increased tax enforcement risk, as well as with CbCR hindering capital investment efficiency. We also find evidence consistent with firms responding to CbCR by reducing organizational complexity. Collectively, our results support the conclusion that mandatory private CbCR causes firms to change real investment activities to substantiate their tax avoidance activities in Europe while reducing the appearance of aggressive tax practices. JEL Classifications: H20; H25; H26; H32; K22; L51; M41; M48; O47.

Multinational corporationEnforcementBusinessInvestment (military)Capital (architecture)Regression discontinuity designMonetary economicsTax avoidanceLabour economicsInternational economicsEconomicsDouble taxation