Real Effects of Private Country-by-Country Disclosure

55 Pages Posted: 14 Jun 2019 Last revised: 5 Jun 2021

See all articles by Lisa De Simone

Lisa De Simone

University of Texas at Austin

Marcel Olbert

London Business School - Department of Accounting; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research

Date Written: May 27, 2021

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. 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.

Keywords: Real Effects, Disclosure Regulation, Private Disclosure, Mandatory Disclosure, Country-by-Country Reporting, Tax Transparency, Tax Avoidance, Tax Havens, Organizational Complexity

JEL Classification: H20, H25, H26, H32, K22, L51, M41, M48, O47

Suggested Citation

De Simone, Lisa and Olbert, Marcel, Real Effects of Private Country-by-Country Disclosure (May 27, 2021). Available at SSRN: https://ssrn.com/abstract=3398116 or http://dx.doi.org/10.2139/ssrn.3398116

Lisa De Simone

University of Texas at Austin ( email )

2110 SPEEDWAY
Stop B6400
Austin, TX 78705
United States

HOME PAGE: http://www.lisa-desimone.com

Marcel Olbert (Contact Author)

London Business School - Department of Accounting ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

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