The Pricing of Profit Shifting

Fotis Delis, Manthos Delis, Sotirios Kokas, Luc Laeven and Steven Ongena

No 20365, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine how equity markets price risks associated with profit shifting by multinational enterprises (MNEs). Using novel estimates across 30,000 MNE-year observations from 2010–2020, we find that greater profit shifting predicts higher future stock returns. A one-standard-deviation increase in profit shifting corresponds to a 6.4% rise in monthly returns, consistent with a premium for regulatory and reputational risks. This effect emerges only after the OECD’s BEPS initiative and intensifies following the U.S. Tax Cuts and Jobs Act, underscoring the role of tax enforcement in shaping risk premia.

Keywords: Corporate; taxation (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2025-06
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