The Impact of Country-by-Country Reporting on Nonprofessional Investor Judgments

• In Event: Taxation

Abstract

This study examines the impact of expanded geographical disclosures on nonprofessional investor judgments. Public country-by-country reporting is a way to increase corporate transparency, enhancing tax fairness and accountability (European Commission 2016). Public disclosure would make large multinational companies share information about profits, taxes paid, and number of employees on a per country basis. Adding to the policy debate on whether publicly available country-by-country information will be properly used, this study employs a 2x2 +1 +1 between participants experiment to investigate the effect of disclosure availability and content on nonprofessional investor judgments. I predict that participants receiving the expanded disclosure will be able to more accurately assess the state of the social contract between the organization and society, imposing sanctions if necessary. Exploring country-by-country reporting provides new information to tax fairness campaigners and regulators on the impact of expanded geographical disclosure as a means of increasing transparency and improving competitiveness.

Authors

• Stephanie Walton, University of South Florida

• Michael Killey, University of Michigan - Dearborn