The Value of Offshore Secrets – Evidence from the Panama Papers

Review of Financial Studies, forthcoming

58 Pages Posted: 28 Apr 2016 Last revised: 22 Mar 2019

See all articles by James O'Donovan

James O'Donovan

City University of Hong Kong (CityU)

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; European Corporate Governance Institute (ECGI)

Stefan Zeume

University of Illinois at Urbana-Champaign

Date Written: October 19, 2018

Abstract

We exploit one of the largest data leaks to date to study whether and how firms use secret offshore vehicles. From the leaked data, we identify 338 listed firms as users of secret offshore vehicles and document that these vehicles are used to finance corruption, avoid taxes, and expropriate shareholders. Overall, the leak erased $174 billion in market capitalization among implicated firms. Following the increased transparency brought about by the leak, implicated firms experience lower sales from perceptively corrupt countries and avoid less tax. We estimate conservatively that one in seven firms have offshore secrets.

Keywords: Panama Papers, tax haven, offshore, corruption, tax evasion, expropriation, corporate misbehavior, Paradise Papers

JEL Classification: G32, G38, H25, H26

Suggested Citation

O'Donovan, James and Wagner, Hannes F. and Zeume, Stefan, The Value of Offshore Secrets – Evidence from the Panama Papers (October 19, 2018). Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=2771095 or http://dx.doi.org/10.2139/ssrn.2771095

James O'Donovan

City University of Hong Kong (CityU) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Hannes F. Wagner (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Stefan Zeume

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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