This study examines the impact of expanded geographical disclosures on nonprofessional investor judgments. Public country-by-country reporting (CBCR) is a way to increase corporate transparency, enhancing tax fairness and accountability (European Commission, 2016). Public disclosure would make large multinational companies share information about profits, taxes paid, and number of employees on a per-country basis. However, it is unclear whether nonprofessional investors would even use CBCR and how they would interpret the information. Adding to the policy debate on whether publicly available country-by-country information will be properly used, this study employs an experimental design to investigate the effect of disclosure availability and content on nonprofessional investor judgments. We find that participants receiving an expanded disclosure are able to more accurately assess the state of the social contract between the organization and society, imposing sanctions if necessary. Exploring CBCR provides timely evidence to regulators, standard setters, and tax fairness campaigners on the impact of expanded geographical disclosures as a means of increasing transparency and improving competitiveness.
We thank John Hasseldine (editor) and the anonymous referee for their helpful comments. This chapter has benefited from comments by Uday Murthy; Rob Pinsker; Tim Rupert; participants at the 2016 Florida Accounting Behavioral Research Symposium, the 2017 Behavioral Tax Symposium, and the 2018 AAA Ohio Region Meeting.
Walton, S. and Killey, M. (2020), "The Impact of Country-by-Country Reporting on Nonprofessional Investor Judgments", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 27), Emerald Publishing Limited, pp. 159-195. https://doi.org/10.1108/S1058-749720200000027006Download as .RIS
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