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Corporate governance, tax evasion and business cycles

Gilbert Mbaraa () and Ryszard Kokoszczyński
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Gilbert Mbaraa: Faculty of Economic Sciences, University of Warsaw

No 2018-10, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: We develop an agency model of corporate tax evasion and auditing by a residual claimant government and embed it to a macroeconomic environment characterised by credit constraints. In our economy, tax auditing by the government reduces the information asymmetry between lenders and entrepreneurs with an investment opportunity. Corporate governance quality consequently affects macroeconomic variables; with changes in tax rates, auditing and quality of corporate governance having aggregate effects. We show that changes in the revenue system; tax and audit rates, can directly affect asset prices and inflate the effects of exogenous shocks to the economy.

Keywords: corporate governance; credit constraints; taxation; asset pricing; tax evasion; agency problem (search for similar items in EconPapers)
JEL-codes: E13 E26 H2 H26 H3 J81 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2018
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-iue, nep-mac, nep-pbe and nep-pub
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