How Common Ownership Can Lead to Tax Avoidance

In recent years there has been a surge in research that explores the sources of variation in corporate tax avoidance. Following this stream of research, tax scholars have begun to acknowledge the potential effect of ownership patterns on firms’ tax behavior.[1] A few recent empirical studies have examined the effect of institutional ownership, particularly quasi-indexers, on the tax behavior of portfolio firms.[2] These studies found a significant positive correlation between tax avoidance and institutional ownership, indicating that the emerging ownership structure in the U.S. economy – common ownership – plays an outsized role in instances of corporate tax … Read more