Disclosure of Corporate Tax Reports, Tax Enforcement, and Insider Trading

Ariadna Dumitrescu () and Jordi Caballé
Authors registered in the RePEc Author Service: Jordi Caballe ()

No 911, Working Papers from Barcelona School of Economics

Abstract: In this paper, we analyze the effects of disclosing corporate tax reports on the performance of financial markets and the use of asset prices by the tax enforcement agency in order to infer the true corporate cash flows. We model the interaction between a firm and the tax auditing agency, and highlight the role played by the tax report as a public signal used by the market dealer and the role of prices as a signal used by the tax authority. We discuss the determinants of both the reporting strategy of the firm and the auditing policy of the tax authority. Our model suggests that, despite disclosure of the tax reports being beneficial for market performance (as the spreads and trading costs are smaller than under no disclosure), the tax agency might have incentives to not disclose the tax report when its objective is to maximize expected net tax collection.

Keywords: Insider Trading; disclosure; corporate tax (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-acc, nep-ger, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:911

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