Transparency, tax pressure and access to finance

Ellul, Andrew, Jappelli, Tullio, Pagano, Marco and Panunzi, Fausto (2012) Transparency, tax pressure and access to finance. Financial Markets Group Discussion Papers (705). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance. The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model's predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 2012 The Authors
Divisions:	Financial Markets Group
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M40 - General
Date Deposited:	26 Jun 2023 15:00
Last Modified:	16 Sep 2023 00:01
URI:	http://eprints.lse.ac.uk/id/eprint/119048

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