How Tax Avoidance Affects Shareholder Value

In my recent paper, Tax Avoidance, Income Diversion, and Shareholder Value: Evidence from a Quasi-Natural Experiment, I examine how the interaction between the corporate tax system and corporate governance affects firm value. To this end, I empirically investigate two main questions. First, do investors value corporate tax avoidance? I find that, on average, they do. Second, does the corporate tax system (which includes both taxes and tax enforcement) affect the level of income diversion? I find that market reactions suggest that higher tax rates can erode good corporate governance  by increasing the return from income diversion, and that stricter … Read more