Market reaction to private Country-by-Country Reporting

Bathusi Gabanatlhong

Economic Modelling, 2025, vol. 152, issue C

Abstract: This paper provides the first empirical evidence of how stock markets respond to private Country-by-Country Reporting (CbCR), a regulation promoting tax transparency. Using an event study, the analysis focuses on African stock markets in countries that are signatories to the Multilateral Competent Authority Agreement (CbC MCAA). The findings reveal a stock price decline for firms subject to CbCR, particularly those with aggressive tax practices, reflecting investor concerns over reduced profit-shifting opportunities. Cross-listed firms experience positive stock price reactions in foreign markets due to expectations of improved corporate governance. In contrast, non-cross-listed firms face negative reactions in domestic markets, driven by heightened tax enforcement risks. These results emphasise the influence of private tax disclosure on market sentiment and its potential to deter aggressive tax avoidance.

Keywords: Private Country-By-Country Reporting; Developing countries; Event study; Tax avoidance; Heterogeneous treatment effects (search for similar items in EconPapers)
JEL-codes: F23 G14 H25 H26 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:152:y:2025:i:c:s026499932500241x

DOI: 10.1016/j.econmod.2025.107246

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