How does governance affect tax avoidance? Evidence from shareholder proposals

I examine the effect of corporate governance on tax avoidance. Specifically, I use a regression discontinuity design to analyse the effect of governance-related shareholder proposals that pass or fail by a small percentage of votes. The passage of such proposals around the 50% threshold can be viewed as random assignment of improved governance and thus cleanly identifies a causal estimate. I find that the adoption of governance proposals decreases cash effective tax rates (ETR), which suggests that improved governance increases tax avoidance. The result contributes to our understanding of the determinants of firms’ ETR.     

How does economic transition breed corruption?

Based on the existing literature, this paper discusses the relationship between economic transition and corruption, and argues that economic transition is one of the main roots of the spread of corruption in transitional China. It divides economic transition into four parts, and examines various channels by which economic transition breeds corruption opportunities. By applying the case statistical analysis method to analyze 594 major corruption cases, it finds the most corruption-prone areas, and provides some empirical evidence on the existence of such channels.     

How does stock liquidity affect corporate tax noncompliance? Evidence from China✰

Using an exogenous shock that drastically increased the liquidity of stocks listed in China, we find robust evidence that higher liquidity significantly increases the overall level of tax noncompliance. The increase is more substantial when controlling shareholders own more shares, and diversion for private benefits is less complementary to tax noncompliance. Liquidity has no significant impact on tax evasion—the most aggressive and risky tax noncompliance—and at the higher ends of the tax noncompliance distribution. The positive and significant effects are observed only at lower levels of tax noncompliance. We attribute the weaker impact of liquidity on aggressive tax noncompliance to diversion being more complementary to higher-risk tax noncompliance.     

How does bargaining power affect remittances?

This paper examines the factors affecting the amount of remittances by migrants to their home countries, in a context of a family bargaining model. Spanish data does not show the same clear relationship between remittances and migrant income that is captured in the theoretical literature and certain empirical papers. Family bargaining models emerge as a useful framework within which to study remittances, and bargaining power is a key element in determining the level of such remittances. As a consequence of the consideration of bargaining power, the effect of income levels on remittances emerges as non-monotonic.     

How does organizational structure affect executive compensation?

Does the rise of the CFO as the second-ranked executive increase the status of the CEO? We find that, as a CFO becomes #2, a CEO receives higher pay in relative terms compared with other top executives. This result corresponds to the literature on span-of-control of executives in top management team.     

How does the internet affect migration decisions?

This article provides new evidence on the impact of the internet on migration decisions. I find that an increase in internet adoption among migrant-sending countries reduces the stock of migrants from these locations. The results are robust to a number of specifications, including an instrumental variable approach that addresses the endogeneity of internet adoption. The findings suggest that the internet may weaken the importance of push factors in the decision to migrate, and that these effects outweigh declines in mobility costs.     

How does violence affect exporters? Evidence from political strikes in Bangladesh

Using novel daily data, we examine the impact of political violence on firm‐level export activity. Our data cover the universe of political strikes and export transactions in Bangladesh during 2010–2013 and allow us to examine the effects of these strikes at a highly granular level. We first show that multiday political strikes lower the likelihood that a firm will export by 6.30 percentage points. We then examine whether these disruptions result in adverse effects on export prices. Given that this violence creates greater risk of missed shipments, importers may respond by demanding lower prices as compensation. We provide the first evidence of such adverse price effects of political violence. Our results suggest that during July to December, 2013, when there was a multiday political strike every 5 days, the prices of time‐sensitive Bangladeshi products declined by 1.59%.     

How does anti-corruption campaign affect the labour income share in China?

Based on the difference-in-difference (DID) methodology, this paper empirically investigates the impact of the current anti-corruption campaign on the share of labour income in China. Using a firm-level data on Chinese corporations listed on Shanghai and Shenzhen Stock Exchanges from 2009 to 2015, we find that the campaign contributes to the rise in the labour income share, while there is considerable heterogeneity. The magnitude of the effect depends on firm’s ownership and market power. This paper advances the existing studies examining the nexus between corruption and income distribution from a novel perspective.     

Microfinance institutions’ transparency in Sub-Saharan Africa

This study analyses the impact of the ownership structure and macro-level factors on Microfinance institutions’ (MFIs) transparency in Sub-Saharan Africa (SSA). Using cross-sectional data from 223 MFIs in 11 countries, we find that MFI transparency in SSA is low and highly variable. Our results indicate that larger MFIs and non-governmental organizations (NGOs) are associated with greater transparency. Greater transparency of NGOs is consistent with the need to sustain and attract donor funding. Country-level resources, such as the level of financial sector development, also impact MFI transparency.     

Does Corruption Persist In Sub-Saharan Africa?

Corruption is said to be characterized by persistence. This conclusion is derived from the theoretical literature, although little empirical evidence exists to support it. Using corruption ratings data from the Political Risk Services Group, International Country Risk Guide on 110 countries from 1984 through 2006, I seek to determine whether or not corruption has actually exhibited persistence over this period. The Markov Transition Chain Matrices were used in the empirical analysis. The calculations show that corruption does persist in more than half of the sample. Next I focus on two regions: Sub-Saharan Africa, the Middle East, and North Africa. The analysis shows these regions to be characterized by persistent corruption.

What drives entrepreneurs underground? The role of tax morale

Using novel cross-country data, we examine whether and to what extent tax morale impacts informal entrepreneurship. Employing instrumental variables strategy, we find that countries with higher tax morale enjoy lower informal entrepreneurship.     

How do electoral and voice accountability affect corruption? Experimental evidence from Egypt

How far does democracy decrease corruption? And which specific aspects of democracy help generate such effects? Corruption is famously one of the strongest obstacles to social and economic development. Whereas there has been extensive research identifying the causes of corruption, there is little experimental research on the impact of political institutions on corruption using designs that control for significant confounders. This paper uses a series of laboratory experiments conducted in 2013 Egypt in which a government official decides whether to spend tax revenues paid by subjects on a self-serving good or a good that benefits everyone equally. We have two experimental manipulations: (a) whether the official is electorally accountable to subjects or not; (b) whether subjects could send messages of protests to the official (and one another). We find evidence that electoral accountability does decrease the probability of the official choosing the self-serving good by 17% whereas voice accountability generates such outcome only in the authoritarian treatment (a reduction of corruption by 29%). We also find suggestive evidence that, in the authoritarian treatment, the likelihood of funding the self-serving good decreases by 27% when taxes paid by citizens fall short of the official’s threshold. Our contribution to the literature is two-fold: (a) we are able to single out the effect of specific democratic mechanisms on government corruption; (b) we test outcomes of democratic mechanisms on a traditionally understudied subject pool.     

How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China

This paper investigates the effect of anti-corruption on the financing of and investing in innovation by using a detailed data set of Chinese listed companies from 2009 to 2015. We find that stronger anti-corruption efforts make firms more likely to acquire external funds, mainly the long-term debt. Moreover, we show that firms located in provinces with stronger anti-corruption efforts invest significantly more of their newly acquired funds in R&D and generate more patents. Further empirical tests suggest this positive and statistically significant effect almost comes entirely from the current massive anti-corruption campaign launched by President Xi Jinping since 2013. We further test two mechanisms regarding the corruption-innovation nexus: the expropriation hypothesis and the rent-seeking hypothesis. The results show that only firms without political connections, non-state owned enterprises (non-SOEs), firms operating in non-regulated industries and younger firms benefit from the stronger anti-corruption efforts, all supportive of the former mechanism.     

How does the design of international environmental agreements affect investment in environmentally-friendly technology?

In this paper, we investigate how the design of international environmental agreements (IEAs) affects the incentives for the private sector to invest in environmentally-friendly technology. The givens are a transboundary pollution problem involving two asymmetric countries in terms of benefits arising from global abatement. There is a single polluting firm in each country. We account for two types of IEAs: an agreement based on a uniform standard with transfers and an agreement based on differentiated standards without transfers. To carry out this study, we use a two-stage game where the private sector anticipates its irreversible investment given the expected level of abatement standards resulting from future negotiations. Our findings indicate that the implementation of the agreement based on a uniform standard with transfers may be preferable for the two countries, as it creates greater incentives for firms to invest in costly abatement technology. This result arises when this technology’s level of the sunk cost of investment is low. If this level is sufficiently high, the implementation of the same agreement is not beneficial to countries, because it takes away the incentive of each firm to invest in new abatement technology. Moreover, this agreement is not able to generate any positive gains for either country through cooperation, thus no country is motivated to cooperate.     

Do Educational Attainments Influence Attitudes Toward Gender Equality in Sub-Saharan Africa?

Abstract

Although there is a plethora of literature on gender equality and women empowerment, studies on whether (and to what extent) educational attainments affect people’s attitudes toward gender equality are lacking. This is particularly true for Africa, a mostly male-dominated continent. In this article, we use data from the Wave 6 of the World Values Survey to empirically examine the relationship between educational attainments and attitudes toward gender equality among people in 5 countries in Africa–Ghana, Nigeria, Rwanda, South Africa, and Zimbabwe. Our results, based on different measures of gender equality and econometric specifications, consistently reveal that the higher the level of education acquired, the more liberal and favorable the individual’s attitudes are toward gender equality.     

How does the ordering of questions affect elicited time preferences?

Since time preferences constitute a concept fundamental to economics, many economists have attempted to elicit time preferences by using multiple price lists. In such endeavours, however, little attention has been paid to the effect of the ordering of questions on elicited time preferences although the ordering effect is well known. We analysed a representative sample of the Indonesian population (13,870 men and 15,858 women) by applying censored maximum likelihood regressions. We exploited the randomized ordering of two series of delay questions (1- and 5-year delays) and estimated the causal effect of the ordering on elicited time preferences. Respondents who considered the longer-delay questions exhibited more patience, and the effects were larger for women. Economists need to take into account the ordering effect as they design experiments by which to elicit time and other preferences.     

How does anti-corruption affect firm labour inputs? Evidence from a quasi-natural experiment in China

This study investigates the impact of anti-corruption on firm labour inputs. Using the province-by-province rollout of the central inspection team campaign in China, we find that the labour intensity rises by 9% in the firms located in the provinces inspected by the central inspection teams. Moreover, firms with low corruption are more susceptible to the policy shock.     

How does leverage affect R&D intensity and how does R&D intensity impact on firm value in South Korea?

We examine how leverage affects corporate research and development (R&D) intensity, as well as examine the impact of R&D on firm value in South Korea, a country in which corporate-funded R&D intensity is one of the highest in the world. Among our main results, we find that growth opportunities have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. Using instrumental variables, we find that R&D generates an increase in firm value.     

Gender difference in support for Democracy in Sub-Saharan Africa: Do social institutions matter?

Several recent papers have noted gender differences in support for democracy in Africa, but the causes of this difference remain unclear. This article investigates whether the observed gender gap is due to the related gender inequality in social institutions, which affects women's daily life and deprives them of social and economic empowerment inside and outside the home. Using Afrobarometer survey data (rounds 2 [2002–3], 3 [2004–5], and 4 [2008–9]), the study finds that the gender difference in support for democracy is no longer significant once gender discrimination is controlled for in the family code, physical integrity, or civil liberties components of the Social Institutions and Gender Index (SIGI). Interaction terms show that women's support for democracy is only lower in places where gender inequality in these social institutions is particularly large. This study thus provides evidence that women who live in countries with favorable institutions toward women are more supportive of democracy than women who do not.     

Do the catholic and protestant countries differ by their tax morale?

Does the tax morale differ between various countries? The paper introduces a model of tax evasion. The equilibrium shadow production is determined by consumers’ and entrepreneurs’ tax morale, affected by the inherited culture or religion. The model suggests that in the conditions of the prisoners’ dilemma, shadow economies tend to be large once a moral code is violated. The implications of the model are tested in the OECD data on groups of countries with different religious denominations in two regimes, 1979–1992 and 1992–2003. We find evidence on a link between tax morale and shadow market activities, but none to support the view that tax morale differs between the catholic south and protestant north in Europe.