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Stock market listing and corporate tax aggressiveness: Evidence from legal reforms in squeeze out in Japan

Masanori Orihara
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Masanori Orihara: Policy Research Institute, Ministry of Finance,Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: Recent literature argues that agency conflicts between shareholders and managers reduce corporate tax aggressiveness. Although stock market listing is a fundamental source of the agency costs, a dearth of widely available data prevents researchers from investigating how monitoring from stock markets affects tax aggressiveness. We use unique panel data that cover both publicly-traded (listed) companies and privately-held (unlisted) companies in Japan. To mitigate endogeneity concerns about the choice to list stocks on public equity markets, we use legal reforms in squeeze out as a quasi-natural experiment. We provide evidence that stock market listing decreases tax aggressiveness among companies whose ownership is concentrated. This result suggests that minority shareholders f option to sell stocks in public markets reduces managers f incentives to be tax aggressive. Our findings link a function of capital markets with public finance by demonstrating that financial developments can contribute to the effective collection of tax revenues.

Keywords: tax aggressiveness; stock market listing; ownership structure; squeeze out (search for similar items in EconPapers)
JEL-codes: G30 G38 H25 H26 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2015-08
New Economics Papers: this item is included in nep-cfn, nep-pbe and nep-pub
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https://warp.da.ndl.go.jp/info:ndljp/pid/11511171/ ... ion_paper/ron270.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:mof:wpaper:ron270

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