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Opportunities to Divert, Firm Value, and Taxation: Theory and Evidence from European Firms

Robert Krämer and Vilen Lipatov

FinanzArchiv: Public Finance Analysis, 2012, vol. 68, issue 1, 17-47

Abstract: We study the relationship between opportunities for managerial diversion, corporate tax system parameters, and the return on shareholder funds. Theoretically, in a simple game between corporate insiders and outsiders, higher costs of diversion increase the return. European firm-level data lend support to these results. Further, in civil-law countries an increase in the corporate tax rate has a positive effect on shareholder value, whereas in common-law countries it has a negative effect.

Keywords: corporate governance; corporate taxation (search for similar items in EconPapers)
JEL-codes: G3 H25 H26 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1628/001522108X632005

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