This paper examines whether and how external country-level corporate governance devices affect corporate tax avoidance. Using a panel of public firms across 33 countries, I show that laws empowering minority shareholders hinder corporate tax avoidance, consistent with shareholder protection laws spilling over to tax avoidance through reduced income diversion. I corroborate the validity of these findings using a major corporate governance reform in Italy. In cross-sectional tests, I further document that firms in countries with stricter transfer pricing rules and stronger tax enforcement reduce tax avoidance to a larger extent. Finally, through path analysis, I provide evidence consistent with firms shifting less income to foreign countries in response to stronger minority shareholder rights. Overall, these findings suggest that minority shareholder protection laws can safeguard outside investors and the government against expropriation by insiders.

Minority shareholders and tax avoidance / Antonio De Vito. - In: JOURNAL OF ACCOUNTING AND PUBLIC POLICY. - ISSN 0278-4254. - ELETTRONICO. - 44:(2024), pp. 107179.1-107179.21. [10.1016/j.jaccpubpol.2024.107179]

Minority shareholders and tax avoidance

Antonio De Vito
Primo
2024

Abstract

This paper examines whether and how external country-level corporate governance devices affect corporate tax avoidance. Using a panel of public firms across 33 countries, I show that laws empowering minority shareholders hinder corporate tax avoidance, consistent with shareholder protection laws spilling over to tax avoidance through reduced income diversion. I corroborate the validity of these findings using a major corporate governance reform in Italy. In cross-sectional tests, I further document that firms in countries with stricter transfer pricing rules and stronger tax enforcement reduce tax avoidance to a larger extent. Finally, through path analysis, I provide evidence consistent with firms shifting less income to foreign countries in response to stronger minority shareholder rights. Overall, these findings suggest that minority shareholder protection laws can safeguard outside investors and the government against expropriation by insiders.
2024
Minority shareholders and tax avoidance / Antonio De Vito. - In: JOURNAL OF ACCOUNTING AND PUBLIC POLICY. - ISSN 0278-4254. - ELETTRONICO. - 44:(2024), pp. 107179.1-107179.21. [10.1016/j.jaccpubpol.2024.107179]
Antonio De Vito
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/954442
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