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Cover of: Opportunities to Divert, Firm Value, and Taxation: Theory and Evidence from European Firms
Robert Krämer, Vilen Lipatov

Opportunities to Divert, Firm Value, and Taxation: Theory and Evidence from European Firms

Section: Articles
Volume 68 (2012) / Issue 1, pp. 17-47 (31)
Published 09.07.2018
DOI 10.1628/001522112X632005
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Summary
We study the relationship between opportunities for managerial diversion, corporate tax system parameters, and the return on shareholder funds. Theoretically, in a simple game between corporate insiders and outsiders, higher costs of diversion increase the return. European firm-level data lend support to these results. Further, in civil-law countries an increase in the corporate tax rate has a positive effect on shareholder value, whereas in common-law countries it has a negative effect.