Mülle , Raphael; Voge , Johannes; Zen al, Jan
A icle
The e ec s o manda o y p i a e disclosu e on public
disclosu e: E idence om CbCR
Schmalenbach Jou nal o Business Resea ch (SBUR)
P o ided in Coope a ion wi h:
Schmalenbach-Gesellscha ü Be iebswi scha e.V.
Sugges ed Ci a ion: Mülle , Raphael; Voge , Johannes; Zen al, Jan (2024) : The e ec s o manda o y
p i a e disclosu e on public disclosu e: E idence om CbCR, Schmalenbach Jou nal o Business
Resea ch (SBUR), ISSN 2366-6153, Sp inge , Heidelbe g, Vol. 76, Iss. 4, pp. 533-571,
h ps://doi.o g/10.1007/s41471-024-00194-2
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ORIGINAL ARTICLE
h ps://doi.o g/10.1007/s41471-024-00194-2
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
The E ec s o Manda o y P i a e Disclosu e On Public
Disclosu e—E idence om CbCR
Raphael Mülle · Johannes Voge · Jan Zen al
Recei ed: 17 Oc obe 2023 / Accep ed: 3 Oc obe 2024 / Published online: 7 No embe 2024
© The Au ho (s) 2024, co ec ed publica ion 2024
Abs ac We analyze he e ec o inc eased manda o y p i a e disclosu e o is-
cal au ho i ies on olun a y public disclosu e decisions. We exploi he in oduc-
ion o Coun y-by-Coun y Repo ing (CbCR), which equi es la ge mul ina ional
co po a ions o epo de ailed geog aphic segmen in o ma ion o iscal au ho i-
ies o p e en income shi ing. Using bo h di e ence-in-di e ences and eg ession
discon inui y designs in ou empi ical app oach, we in es iga e how mul ina ional
co po a ions espond o CbCR in hei public disclosu e o geog aphic in o ma ion
in inancial s a emen s and he na a i e pa o annual epo s. We ind ha i ms
subjec o CbCR dec ease hei disclosu e o quali a i e and sensi i e geog aphic
in o ma ion. This e ec is pa icula ly p onounced o i ms po en ially subjec o
highe sc u iny by ax au ho i ies and o i ms wi h a s onge in e na ional p es-
ence. Ou esul s sugges ha p i a e and public disclosu e o geog aphic in o ma ion
a e subs i u es in he con ex o he manda o y p i a e epo ing equi emen unde
CbCR.
Keywo ds CbCR · Manda o y P i a e Disclosu e · Volun a y Public Disclosu e ·
Tax A oidance
JEL Classi ica ion H26 · M41 · M48
Raphael Mülle · Johannes Voge · Jan Zen al
Uni e si y o Mannheim, Mannheim, Deu schland
E-Mail: jan.zen [email protected]
Raphael Mülle
E-Mail: aphael.muelle @uni-mannheim.de
Johannes Voge
E-Mail: oge @uni-mannheim.de
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534 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
1 In oduc ion
P o i shi ing by mul ina ional co po a ions is iewed as a pe asi e p oblem
(Tø slø and Wie 2023; Clausing 2016). P o i shi ing e odes he ax base, educing
ax e enue and con ibu ing o he iscal cons ain s aced by many go e nmen s.
Addi ionally, i unde mines he poli ical legi imacy and c edibili y o he exis ing
in e na ional amewo k. The e o e, he O ganisa ion o Economic Co-ope a ion
and De elopmen (OECD) is ac i ely engaged in educing p o i shi ing. One ma-
jo ini ia i e o he OECD’s Base E osion and P o i Shi ing (BEPS) p ojec is
CbCR (OECD 2015). Unde CbCR, companies abo e a ce ain e enue h eshold
a e equi ed o ile de ailed coun y-le el in o ma ion, which is sha ed among iscal
au ho i ies upon eques .
Fi ms a e subjec o se e al in o ma ion epo ing egimes, each c ea ing speci ic
epo ing incen i es depending on he in ended use s o he in o ma ion (e.g., in-
es o s, iscal au ho i ies). S ill, he in o ma ion demanded by di e en s akeholde s
may o e lap o a ce ain ex en (Mülle e al. 2020). P io li e a u e has es ab-
lished ha i ms’ manda o y disclosu es o selec ed s akeholde s in luence public
disclosu e decisions (Bozanic e al. 2017;Towe y2017). Howe e , i is no clea
how inc eased manda o y p i a e ax epo ing egula ions such as CbCR a ec
he public disclosu e decisions o i ms. In his con ex , ou s udy aims o answe
he ollowing esea ch ques ion: Did he in oduc ion o CbCR change he public
disclosu e choices o he a ec ed mul ina ional co po a ions?
Theo y p edic s ha i ms weigh he cos s and bene i s o olun a ily disclos-
ing ax- ela ed in o ma ion o in es o s and o he s akeholde s (Healy and Palepu
2001). Whe he p i a e disclosu e equi emen s e ec i ely change public disclosu e
decisions is ambiguous because i ms will only eac i hey assume ha in es o s
and o he s akeholde s will ind he public in o ma ion use ul and ha hose bene i s
will ou weigh he cos s o he iscal au ho i y and compe i o s using he in o ma-
ion. Mo e speci ically, s ic e p i a e ax epo ing migh educe p op ie a y cos s
associa ed wi h ha in o ma ion. I he iscal au ho i y al eady has he in o ma ion
as a esul o he con iden ial disclosu e, he public disclosu e o he in o ma ion
may be less cos ly. Thus, bo h se s o disclosu e would be complemen s om he
i m’s pe spec i e i i ms inc ease olun a y public disclosu e o in o ma ion ha
is aluable o in es o s (Kays 2022). Al e na i ely, i ms may dec ease olun a y
public disclosu e i CbCR inc eases he isk ha s akeholde s exe p essu e on is-
cal au ho i ies o in es iga e u he i s akeholde s a e discon en wi h he i m’s
geog aphic dis ibu ion o p o i s. Volun a y public disclosu e may also dec ease
o a oid he isk o unwa an ed a en ion om iscal au ho i ies i disc epancies
be ween p i a e CbCR and olun a y public disclosu e a ise.1This would sugges
ha p i a e and public disclosu e a e subs i u es om he i m’s pe spec i e (Hope
e al. 2013).
1Fi ms may also dec ease hei olun a y public disclosu e i in es o demand o in o ma ion dec eases
due o be e moni o ing o i ms by iscal au ho i ies a e CbCR, he eby mi iga ing in o ma ion asym-
me ies be ween he i m and i s sha eholde s.
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 535
This s udy uses he in oduc ion o CbCR in se e al coun ies as an exogenous
shock o answe he ques ion whe he i ms adjus hei olun a y disclosu e in
annual epo s. I aims o imp o e ou unde s anding o how p i a e disclosu e
equi emen s may a ec public disclosu e decisions. Ou main iden i ica ion s a egy
is based on a di e ence-in-di e ences (DiD) design ha exploi s he applicabili y
o CbCR a he e enue h eshold. I CbCR al e s he cos s o public disclosu e
o he epo ed in o ma ion, one would expec changes in disclosu e ha ela e o
i ms’ geog aphic ac i i ies o ea nings. We also exploi local a ia ions in disclosu e
a ound he e enue h eshold h ough a eg ession discon inui y design (RDD).
We cons uc ou da ase based on h ee main sou ces. We i s d aw a wo ld-
wide selec ion o inancial da a o lis ed mul ina ional co po a ions om Bu eau
an Dijk’s (B D) O bis da abase. Second, we use a chi al da a on hese i ms’ seg-
men epo ing om he Bloombe g da abase o analyze changes in hei disclosed
geog aphic segmen s by inancial i em. Thi d, we employ ex ual analysis me hods
o exploi he ich se o quali a i e disclosu e con ained in he ex o annual e-
po s2. We ob ain he annual epo s om Pe ec In o ma ion’s “Filings Expe ”
da abase and he SEC’s EDGAR da abase.3This app oach enables us o exploi he
in o ma ion con ained in annual epo s’ na a i e sec ions (Lewis and Young 2019;
Lough an and McDonald 2016). The esul ing sample co e s 4253 i ms in he yea s
2010 o 2020 wi h 25,950 o al obse a ions.
We p o ide e idence ha i ms signi ican ly changed hei disclosu e p ac ices
owa ds less olun a y in o ma ion p o ision on hei geog aphic ac i i ies and ea n-
ings a e he in oduc ion o manda o y CbCR. We u he ind ha quan i a i e
disclosu e o sensi i e geog aphic in o ma ion dec eased. Simila ly, we documen
a dec ease in quali a i e coun y disclosu e in annual epo s. We ind he i s e -
ec o be mo e p onounced o i ms loca ed in ju isdic ions wi h highe po en ial
sc u iny by iscal au ho i ies. Mo eo e , he dec ease in quali a i e geog aphic dis-
closu e is s onge o i ms which a e mo e in e na ional. Hence, ou main esul s
sugges ha , in he con ex o geog aphic in o ma ion p o ision, olun a y public
disclosu e and manda o y p i a e disclosu e a e subs i u es om he i m’s pe spec-
i e.
Mos s udies on he in e ac ion o manda o y and olun a y disclosu e conside
se ings in which bo h ypes o disclosu es a e public. Bischo and Daske (2013),
o example, con i m, in he con ex o s ess- es ing banks’ capi al bu e s, he
p edic ion by Einho n (2005) ha ini ial manda o y disclosu e lowe s he h esh-
old o u u e olun a y disclosu es. Fu he mo e, disclosu e heo y sugges s ha
i ms may inc ease olun a y disclosu e o in es o s when hey ha e highe -quali y
in e nal in o ma ion (Ve ecchia 1990). Manda ing addi ional disclosu e can o ce
i ms o imp o e hei in e nal in o ma ion en i onmen and o p ocess all a ailable
in o ma ion mo e e ec i ely (see, e.g. Samuels (2021) o ela ed e idence).
2We e e o quali a i e disclosu e as any ex ual in o ma ion p o ided in he annual epo . This also
includes sec ions on managemen discussion and analysis. In many accoun ing egimes, hese managemen
epo s a e no equi ed o be audi ed, al hough in some egimes, he audi o may ha e o posi i ely con i m
ha he e a e no disc epancies be ween he inancial epo and he managemen epo .
3Fo mo e in o ma ion, see h ps://www.pe ec in o.com/ ilings-expe (accessed on 1 June 2021).
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536 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Howe e , which o hese exis ing insigh s ca y o e o he case when manda o y
disclosu e is p i a e, no public, is an open ques ion. E idence on he se ing wi h
manda o y p i a e disclosu e is sca ce and we con ibu e o his eme ging li e a u e.
So a , he ew s udies on he in e ac ion be ween p i a e and public disclosu e
se s ha e mos ly ocused on empi ical se ings in he Uni ed S a es (US) (Bozanic
e al. 2017;Towe y2017; Hope e al. 2013). We ex end his li e a u e by examining
he disclosu e esponses o a la ge, in e na ional sample o i ms wi h espec o
geog aphic in o ma ion, which exhibi s e y di e en cha ac e is ics compa ed o
o he disclosu e i ems.
Bozanic e al. (2017) ind ha , ollowing manda o y p i a e disclosu e in he
o m o Schedule UTP, i ms signi ican ly inc eased he quan i y o olun a y ax-
ela ed disclosu es, consis en wi h lowe ax- ela ed p op ie a y cos s o disclosu e.
Ex apola ing his pa e n o he p i a e CbCR se ing would imply ha olun a y
geog aphic in o ma ion disclosu e inc eases once manda o y p i a e disclosu e o
iscal au ho i ies is in oduced. Howe e , ou esul s e eal he opposi e pa e n a e
CbCR in oduc ion. This shows ha an inc ease in olun a y disclosu e in esponse
o manda o y p i a e disclosu e o he iscal au ho i y canno be aken o g an ed.
Ins ead, he ela ionship be ween manda o y p i a e disclosu e and public olun a y
disclosu e can e en in e unde ce ain ci cums ances. This is he case in ou
se ing, in which he cha ac e is ics o he disclosu e con en di e om p e ious
analyses in impo an aspec s. Besides he p op ie a y cos o disclosu e o iscal
au ho i ies, he e a e wo o he sou ces o subs an ial p op ie a y cos s o geog aphic
disclosu e: leakage o aluable in o ma ion o compe i o s and epu a ional conce ns
ela ed o s akeholde discon en wi h he i m’s geog aphic dis ibu ion o p o i s
o in es men . Fu he mo e, ull CbCR being a ailable o he iscal au ho i y may
ha e posi i e eedback e ec s on he la e ype o p op ie a y cos s ela ed o public
sc u iny, because he public expec s he iscal au ho i y o use i s in o ma ion and
in es iga e u he i al eady he publicly disclosed geog aphic in o ma ion e eals
conspicuous spa ial dispa i ies in p o i abili y.
In a ela ed s udy, Chi e al. (2023) ind ha mul ina ional co po a ions a e mo e
likely o issue olun a y e ec i e ax a e (ETR) o ecas s a e CbCR adop ions wi h
he in e p e a ion ha he ax- ela ed in e nal in o ma ion en i onmen imp o es ol-
lowing CbCR compliance. A i s glance, his seems con adic o y o ou esul s.
Howe e , as discussed abo e, he di e ence in ou comes is due o he di e ence in
cha ac e is ics o he disclosu e con en . Disclosu e o geog aphic in o ma ion po en-
ially incu s subs an ial p op ie a y cos s ela ed o in o ming compe i o s and public
sc u iny. Volun a y ETR o ecas s may no incu hese cos s as hey a e equen ly
no disagg ega ed a he segmen le els. Mo eo e , non-in es ing s akeholde s wi h
an in e es in ETRs gene ally ocus on he ealized ETRs in annual accoun s ins ead
o he o ecas s.
Two s udies examine co po a e disclosu e esponses o public ax disclosu e eg-
ula ions (B own e al. 2019;Kays2022). In con as , we in es iga e he e ec o
a con iden ial epo ing egime on public disclosu e decisions. I is impo an o
keep in mind ha CbCR al e s only he amoun o in o ma ion a ailable o iscal
au ho i ies, no o o he pa ies. By analyzing he public disclosu e esponses o
inc eased p i a e disclosu e, we also add ess he call o mo e esea ch on he e -
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 537
ec s o ax- ela ed disclosu e egula ion (Dy eng and Maydew 2018;Hanlonand
Hei zman 2010).
2 Ins i u ional Backg ound and Rela ed Li e a u e
2.1 Coun y-by-Coun y Repo ing and Disclosu e o Geog aphic Ac i i ies
The e ela ion o agg essi e ax planning s a egies and o sho e ac i i ies o mul i-
na ional co po a ions has mo ed ax planning in o he ocus o public a en ion and
c ea ed he pe cep ion ha mul ina ional co po a ions ci cum en exis ing ax egu-
la ions a he expense o he public budge s. Consequen ly, ensu ing ax anspa ency
has become a p ima y egula o y conce n o policymake s a ound he wo ld. Fol-
lowing i s manda e o de elop binding policy ins umen s agains BEPS, he OECD
p oposed a new ans e p icing documen a ion amewo k, including a comp e-
hensi e CbCR and in o ma ion exchange sys em o enhance anspa ency o iscal
au ho i ies (Ac ion 13). The OECD a gues ha CbCR should equip iscal au ho i ies
wi h he in o ma ion necessa y o iden i y po en ial ans e p icing isks associa ed
wi h ax planning s a egies (OECD 2015). Unlike o he exis ing CbCR amewo ks
o banks o he ex ac i e indus y, he epo s a e no made publicly a ailable and
a e exchanged upon eques among iscal au ho i ies only. The OECD issued de-
ailed guidelines and model ules o ha monize he implemen a ion o CbCR ac oss
pa icipa ing coun ies. So a , o e 100 ju isdic ions ha e adop ed he CbCR ame-
wo k, including a signi ican ac ion o he wo ld’s majo o sho e inancial cen e s
(i.e., ax ha ens).4Mos coun ies op ed o apply CbCR egula ion as o he iscal
yea 2016.
The obliga ion o ile a CbC epo applies o all mul ina ional co po a e g oups
whose ul ima e pa en is esiden o ax pu poses in a coun y wi h CbCR legisla ion
in place o which has a leas one subsidia y o pe manen es ablishmen loca ed
in such a coun y. Mul ina ional co po a e g oups a e exemp om he CbCR iling
obliga ion i he consolida ed g oup e enues in he p eceding iscal yea emain
below a ce ain e enue h eshold. While go e nmen s may se hei own h esholds,
mos legisla o s adop ed a h eshold oughly equi alen o C750 million. Gi en he
widesp ead adop ion o CbCR, mos mul ina ional co po a e g oups ha exceed he
e enue h eshold a e likely o incu a epo ing obliga ion in a leas one coun y.
The CbC epo s consis o h ee ables. In he i s able, mul ina ional co po a e
g oups ha e o epo inancial i ems—agg ega ed on a coun y le el. These i ems
include, among o he s, (un-) ela ed pa y e enues, o al e enues, p o i be o e
income axes, income ax paid, and angible asse s. The second able con ains a lis
o all cons i uen en i ies o he g oup by coun y o esidence and hei p ima y
business ac i i ies. The hi d able allows mul ina ional co po a e g oups o explain
and speci y he inancial igu es and ac i i ies om he p e ious ables o acili a e
4The OECD summa izes he cu en s a us o implemen a ion o pa icipa ing coun ies. See h ps://
www.oecd.o g/ ax/au oma ic-exchange/coun y-speci ic-in o ma ion-on-coun y-by-coun y- epo ing-
implemen a ion.h m (accessed on 3 Janua y 2023).
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538 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
he in e p e a ion o he disclosed in o ma ion o iscal au ho i ies. Companies may
also olun a ily disclose addi ional quali a i e in o ma ion o a oid ambigui y, o
example, by mo i a ing legi ima e ope a ions in a ax ha en coun y.
The con en o he con iden ial CbC epo s, i.e., he de ailed geog aphic b eak-
down o inancial i ems and in e na ional ac i i ies, goes a beyond he no mal
public disclosu e equi emen s o la ge i ms unde IFRS o US GAAP. In ac ,
geog aphic epo ing only plays a mino ole in inancial s a emen s. Bo h s anda ds
equi e companies o epo sales and asse s in he no es o he inancial s a emen s
o each ma e ial coun y in which hey ope a e. The disclosu e o addi ional i-
nancial i ems, such as ea nings be o e axes o income axes, is olun a y. Since
he s anda ds lack a clea de ini ion o ma e iali y, companies equen ly epo hei
home coun y and agg ega e all o eign ope a ions in o egions o simply in “ o eign
a ea” (Akamah e al. 2018). Thus, while companies migh decide o disclose mo e
g anula ed in o ma ion on geog aphic ac i i ies and ea nings, hey a e no equi ed
o epo on a coun y-by-coun y basis. In addi ion o geog aphic segmen epo -
ing, Eu opean i ms need o disclose a lis o all subsidia ies in he no es. Simila ly,
US i ms mus disclose a lis o all signi ican subsidia ies, including hei loca ions
in Exhibi 21 (Dy eng e al. 2020). Howe e , no inancial i ems a e equi ed o be
epo ed.
Public disclosu e o geog aphic in o ma ion in annual epo s is no limi ed o
accoun ing igu es in inancial s a emen s. Mos o he o he sec ions o annual e-
po s a e na a i e in na u e and allow manage s o con ey con ex ual in o ma ion
abou de elopmen s ha a e ele an o u u e alue c ea ion o a ec business
undamen als bu a e no well-cap u ed by he accoun ing measu es. This in o -
ma ion could include discussions abou i ms’ o eign business ac i i ies, ongoing
li iga ions, o compliance wi h egula o y equi emen s. The disclosu e o addi ional
con en in annual epo s is subjec o many coun y-speci ic egula ions and is usu-
ally no ha monized ac oss i ms. S ill, mos ju isdic ions equi e i ms o include
some quali a i e “managemen epo ” on hei business model and he isk en i on-
men o he i ms o p o ide a con ex ual, na a i e basis o he backwa d-looking
inancial igu es. The managemen epo s co e a ious opics, and manage s ha e
conside able disc e ion in selec ing he con en and ype o in o ma ion. Beyond
hese legal p o isions, i ms o en include supplemen a y in o ma ion on g ow h
oppo uni ies and isk exposu e in o eign ma ke s.
2.2 E ec s o P i a e Tax Repo ing On Public Disclosu e Decisions
The inancial epo ing s anda ds de ine he minimum le el o public in o ma ion dis-
closu e conce ning geog aphic segmen a ion. Beyond hese epo ing equi emen s,
manage s will assess he cos s and bene i s o disclosing addi ional in o ma ion o
hei in es o s and o he s akeholde s (Healy and Palepu 2001). Se e al explici cos s
may ha e impeded manage s om olun a ily disclosing mo e in o ma ion abou
geog aphic ac i i ies and pe o mance. Fi s , he cos o p epa ing he in o ma ion
may ha e hinde ed disclosing geog aphic in o ma ion in he pas . While he cos s o
p epa ing such epo s may no be subs an ial, he cos o complying wi h CbCR was
a majo conce n i ms aised agains he CbC equi emen (Spengel 2018). Howe e ,
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 539
a e he in oduc ion o CbCR, he cos o publicly disclosing his in o ma ion (a
leas pa ially) is subs an ially educed. This would end o inc ease i ms’ olun a y
disclosu e o geog aphic in o ma ion as a esponse o manda o y p i a e CbCR.
The assump ion ha manda o y disclosu e may spu i ms o p oduce new (and
po en ially bene icial) in o ma ion is consis en wi h he esul s o Sh o (2017).
The au ho inds ha a e changes in GAAP, he i m’s in es men s change, as he
ac o complying wi h GAAP p esen s he manage wi h mo e in o ma ion ha helps
in o m in es men .
Ano he eason why companies we e hesi an o disclose geog aphic in o ma ion
p io o CbCR could be ha hey expec ed iscal au ho i ies o access and use he
in o ma ion om he public inancial disclosu es.5Hope e al. (2013), o ins ance,
show ha i ms op ing o disclosing less geog aphic ea nings in hei segmen e-
po ha e lowe e ec i e ax a es (ETRs). The au ho s conclude ha i ms wi h
low ETRs educe olun a y disclosu e o disguise hei ax planning beha io om
iscal au ho i ies. Simila ly, Deng e al. (2021) documen ha ax-a oiding i ms a e
less likely o disclose segmen -le el ax in o ma ion. The in oduc ion o a p i a e
CbCR makes hese conside a ions obsole e, as iscal au ho i ies now ha e e y de-
ailed in o ma ion a hei disposal. Hence, i ms migh be mo e inclined o disclose
his in o ma ion publicly in hei annual epo s a e CbCR. The i m’s olun a y
public in o ma ion p o ision and i s manda o y p i a e disclosu e would hen be
complemen s, he same pa e n as in Bozanic e al. (2017).
Ye , disclosing geog aphic in o ma ion migh s ill be p ohibi i ely cos ly o
some i ms. Fo ins ance, in o ma ion abou he p o i abili y o ope a ions in o eign
ma ke s migh be help ul o compe i o s. In suppo o he idea ha i ms expec
compe i o s o lea n om hei co po a e disclosu es, Leung and Ve ies (2019)
show ha companies end o hide in o ma ion abou ope a ions in economically
a ac i e egions and egions wi h low ma ke en y ba ie s. These compe i o -
ela ed p op ie a y conce ns could lead o i ms being unwilling o disclose he
in o ma ion, despi e ha ing he in o ma ion compiled al eady.
In addi ion o p op ie a y cos s o geog aphic disclosu e emaining high—due
o p op ie a y in o ma ion leaking o compe i o s o due o conce ns abou pub-
lic sc u iny— he e a e h ee easons o which manda o y p i a e CbCR can ha e
a subs i u i e e ec on i ms’ olun a y public p o ision o geog aphic in o ma-
ion. Fi s , he coun y-le el numbe s in he p i a e CbCR may no add up o he
same geog aphic p opo ions ha one would expec based on he geog aphic seg-
men in o ma ion disclosed be o e CbCR—ei he because i ms ha e esponded o
CbCR by shi ing inpu ac o s (De Simone and Olbe 2022), o also because i ms
consolida e coun y-le el in o ma ion di e en ly o p i a e CbCR and o public
disclosu e. By educing he le el o de ail in hei olun a y geog aphic in o ma ion,
i ms can cloud shi s in he p opo ions o geog aphic segmen s which a e di ec ly
ela ed o he in oduc ion o CbCR, he eby lowe ing he isk o unwa an ed a -
en ion om iscal au ho i ies and o he s akeholde s. In a ela ed se ing, Towe y
(2017) examines whe he i ms adjus hei ese es o unce ain ax bene i s in
5Fo he US, Bozanic e al. (2017) show ha he IRS indeed downloaded i ms’ inancial disclosu es as
an addi ional sou ce o in o ma ion.
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540 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
inancial epo s ollowing he p i a e epo ing equi emen s unde Schedule UTP.
He esul s indica e ha i ms changed hei inancial epo ing o unce ain ax
posi ions o a oid he disclosu e o addi ional in o ma ion o he IRS.6
Second, i is common knowledge ha he iscal au ho i ies ha e access o he ull
CbCR in o ma ion. Hence, he public, he media, o poli icians may exe p essu e
on iscal au ho i ies o in es iga e u he once hey suspec a disc epancy be ween
he i ms’ public geog aphic disclosu e and he deemed ac ual i m beha io (Mülle
e al. 2024). A e CbCR, i ms consequen ly educe olun a y geog aphic epo ing
o coun e ac he inc eased isk om public sc u iny.
Thi d, in es o s may pe cei e iscal au ho i ies as de ac o he la ges mino -
i y sha eholde s o i ms due o hei ax claim on i m p o i s. The au ho i ies’
moni o ing o i ms bene i s egula sha eholde s as i inhibi s no only ax a oid-
ance ac i i ies bu also ela ed oppo uni ies o manage s o ex ac p i a e bene i s
(Bennedsen and Zeume 2018; Desai e al. 2007; Desai and Dha mapala 2006;Du
e al. 2019; Hanlon e al. 2014). In his case, CbCR leads o be e in o med iscal
au ho i ies and hus be e ex e nal moni o ing. Consequen ly, olun a y geog aphic
in o ma ion disclosu e becomes less ele an o mi iga ing in o ma ion asymme ies
be ween i ms and in es o s.
The in oduc ion o p i a e CbCR—a geog aphic b eakdown o ac i i ies and
p o i abili y—hence cons i u es a majo egula o y shock o he in o ma ion en i-
onmen o mul ina ional co po a ions educing he in o ma ion asymme y be ween
in e na ional i ms and iscal au ho i ies. Whe he and how he public disclosu e o
geog aphic in o ma ion changes ollowing CbCR is e en ually an empi ical ques-
ion. Conside ing he compe ing p edic ions om he p e ious a gumen s, we do no
make a di ec ional p edic ion, bu s a e he hypo hesis in null o m:
H1 Fi ms will no change hei ( olun a y) public disclosu e o geog aphic in o -
ma ion ollowing he implemen a ion o CbCR.
3 Empi ical App oach and Me hodology
3.1 Empi ical S a egy
3.1.1 DiD App oach
As a baseline iden i ica ion app oach, we use he in oduc ion o CbCR as an exoge-
nous policy shock o companies’ in o ma ion en i onmen a ec ing hei olun a y
disclosu e decisions. The e o e, ou iden i ica ion s a egy is based on a DiD ap-
p oach es ima ed ia he o dina y leas squa es (OLS) me hod. This allows us o
6Mo eo e , i ms may ha e used he deg ees o eedom in olun a y geog aphic epo ing o pick a spe-
ci ic geog aphic segmen a ion sui ed o signal low le els o ax a oidance. Howe e , CbCR leads o iscal
au ho i ies being in o med a he g anula coun y le el. This elimina es he oppo uni y o po ay a spe-
ci ic geog aphic pic u e o he i m o iscal au ho i ies ia olun a y epo ing. Hence, manda o y p i a e
CbCR dec eases a speci ic incen i e o olun a y geog aphic epo ing.
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 547
ul ima e pa en en i ies (UPE) o lis ed i ms wi h u no e exceeding C50 Mio. a
leas once du ing he pe iod o 2010–2020 (see Table 3). We equi e all i ms o ha e
su icien inancial da a a ailable in O bis o es ima e ou baseline models.12 F om
his ini ial sample, we d op obse a ions wi hou u no e da a, which a e needed
o de e mine he ea men s a us o he i m. Nex , we exclude i ms ope a ing in
he banking and ex ac i e indus y as hese i ms may be subjec o a public CbCR
egime in he EU (Joshi e al. 2020; Johannesen and La sen 2016). Mo eo e , we
lose 5339 obse a ions which ha e no in e na ional secu i y iden i ie (ISIN), lea ing
us wi h 13,992 unique i ms.
We ob ain ou geog aphic segmen da a om he Bloombe g da abase. Bloombe g
ex ac s hese da a om publicly a ailable company documen s (e.g., annual epo s,
sus ainabili y epo s, in es o p esen a ions e c.) o publicly lis ed i ms wo ldwide.
The da abase hence con ains bo h olun a y and manda o y disclosu e i ems. We
dis ega d highly agg ega ed in o ma ion a he sup a-na ional le el and conside
only i ems epo ed a a coun y le el o ensu e compa abili y ac oss obse a ions.
To cons uc ou quali a i e measu e o geog aphic disclosu e om annual epo s,
we use Pe ec In o ma ion’s “Filings Expe ” da abase. The da abase con ains o e
15 million co po a e documen s o oughly 50,000 globally lis ed public companies.
We con e he annual epo s om PDF in o machine- eadable o ma and pa se
he ex in o sen ences o cons uc ou a iable o in e es (see Appendix o mo e
de ails). Fo US companies, we download he Fo m 10-Ks by accessing he EDGAR
da abase and use hese epo s o de e mine he le el o geog aphic disclosu e. A e
me ging he da a om Bloombe g and om he annual epo s by Pe ec In o ma ion
o ou main sample, we a e le wi h 31,459 i m-yea obse a ions om 5339 unique
i ms.
Gi en ha CbCR only a ec s i ms ha ope a e in e na ionally, we con inue by
d opping domes ic i ms as well as holding companies. Domes ic i ms a e nei he
a ec ed by CbCR no ele an in hei geog aphic disclosu e.13 We exclude holding
companies because we canno sa ely a ibu e a CbCR speci ic o one coun y in
hese cases.14 Fo he emaining sample, we ollow he cleaning p ocedu e by Lang
and S ice-Law ence (2015), who also used a la ge sample o annual epo s o in e -
na ional i ms o hei analysis.15 We also es ic he sample o coun ies wi h no
less han en unique i ms, educing ou sample again by 252 obse a ions. Toge he ,
hese equi emen s educe ou inal sample size o 25,950 i m-yea obse a ions by
4253 unique i ms om 37 coun ies.
12 Fo he US and Canada, inancial da a a e d awn om Compus a No h Ame ica, which has a b oade
co e age o inancial in o ma ion o lis ed i ms om hese wo ju isdic ions.
13 We de ine i ms as domes ic when hey ha e no o eign subsidia ies and no epo ed o eign segmen s.
14 We de ine i ms as holding companies when hei coun y o domicile does no coincide wi h he coun-
y o lis ing, as measu ed h ough di e ing coun y a ibu ions be ween ou h ee da abases ORBIS,
Bloombe g and Pe ec in o ma ion. In ou sample, hese i ms a e mainly o Chinese o igin and lis ed
in common ax ha en coun ies like he Be mudas o Cayman Islands o easie access o capi al ma ke s
(Coppola e al. 2021).
15 In pa icula , we exclude annual epo s wi h a Fog-Index below 12 and abo e 30. We also exclude
documen s wi h less han 50 sen ences o less han 100 wo ds as he a e age annual epo is subs an ially
longe and d op emaining duplica es.
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548 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Table 3 Sample Selec ion
Sample Selec ion P ocess Obse a ions Unique Fi ms
Publicly Lis ed Ul ima e Pa en En i ies om O bis o
2010–2020
140,893 17,567
Missing Tu no e Da a –1542 –
Exclude Banking and Ex ac i e Indus y –18,181 –
Missing ISIN –3938 –
= Sample P epa ed o Analysis wi h Disclosu e Da a 117,232 13,992
No Ma ched o Bloombe g Segmen Da a –29,432 –
No Annual Repo om Pe ec In o ma ion/Fo m 10-K om
EDGAR
–56,341 –
= Obse a ions wi h Segmen & Tex ual Da a 31,459 5339
Exclude Domes ic and Holding Fi ms –4408 –
Cleaning S eps Applied by Lang and S ice-Law ence (2015) –849 –
Exclude coun ies wi h less han 10 unique i ms –252 –
= Final Sample 25,950 4253
No es: his able p o ides he selec ion p ocess o de i ing a ou inal sample. The i s ou ows p esen
he s eps o selec ing ou ini ial sample based on a ious selec ion c i e ia om ORBIS. Rows (6) and (7)
depic he p ocess o selec ing u he based on a ailabili y o bo h quan i a i e and quali a i e in o ma ion
in Bloombe g and Pe ec In o ma ion/Edga . The equi emen o i ms o be co e ed by Bloombe g and
Pe ec In o ma ion esul s in some unde ep esen a ion o Chinese, Sou h-Ko ean and Taiwanese i ms.
This may e lec ha hese coun ies ha e a subs an ial numbe o small, publicly lis ed i ms wi hou an
in e na ional in es o base. The emaining s eps in ows (9)–(11) ela e o cleaning he sample o ensu e
da a alidi y and sui able obse a ions o u he analysis. We de ine companies as domes ic i hey ha e
no o eign subsidia ies. We exclude domes ic i ms because hey a e no a ec ed by CbCR and no ele an
in hei geog aphic disclosu e. Holding companies a e iden i ied ia name-ma ching. We exclude hose
holding companies whose coun y o esidence and coun y o domicile do no coincide acco ding o
ou da a sou ces. O he wise, we would no be able o assign a coun y-speci ic ea men by CbCR. This
a ec s mainly Chinese companies ha a e es ablished simul aneously in e.g. Hong Kong, Be mudas o he
Cayman Islands. See Sec . 3.3 o u he de ail
3.4 Desc ip i e S a is ics
Table 2depic s he geog aphic composi ion o ou sample i ms, he applicable
e enue h eshold, and he implemen a ion yea in he espec i e coun y. The as
majo i y o coun ies s a ed o apply he CbCR equi emen o he iscal yea
2016. The la es implemen a ion in ou sample occu ed in 2019 o Tu key. The
applicable size h esholds a y mainly due o exchange a e luc ua ions bu a e
mos ly compa able ac oss coun ies. Some no able exemp ions can be obse ed, o
ins ance, o Mexico and Nige ia. Conce ning he geog aphic dis ibu ion o ou
obse a ions, wo aspec s a e no ewo hy. Fi s , he coun y wi h he highes numbe
o obse a ions is he US, ollowed by Japan and Aus alia. In gene al, Pe ec
In o ma ion also co e s i ms in de eloping and eme ging economies, p o iding
an in e es ing se ing o ou analysis. This dis inguishes ou sample om o he
s udies in he con ex o CbCR, which o en ocus on Eu opean i ms (De Simone
and Olbe 2022; Joshi 2020). Second, we s ill obse e a easonable numbe o
epo s o Wes e n Economies. The di e ences in obse a ions be ween same-sized
economies as F ance and Ge many migh be d i en by ou equi emen ha he
epo s mus be a ailable in English.
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 549
Table 4 Desc ip i e S a is ics by T ea men S a us
Con ol g oup: cons. e enues<
h eshold
T ea ed g oup: cons. e enues>
h eshold
Be o e CbCR A e CbCR Be o e CbCR A e CbCR
Va iable Mean Obs Mean Obs Mean Obs Mean Obs
Geo. Seg. coun o
EBITDA
1.32 662 1.46 496 2.34 493 2.9 347
Geo. Seg. coun o
G oss P o i s
1.25 560 1.22 755 1.58 663 1.53 677
Geog. Seg. coun
o Ope a ing In-
come
1.70 1576 1.57 1833 2.22 2540 2.11 2210
Sensi i e geo-
g aphic in o ma-
ion
0.57 5391 0.56 5915 0.81 7708 0.76 6936
Geo. Seg. coun o
Re enues
3.13 5314 3.04 5847 3.76 7641 3.77 6898
Geo. Seg. coun o
Asse s
1.94 2311 1.81 2425 2.33 3074 2.15 2516
Insensi i e geo-
g aphic in o ma-
ion
3.14 5391 3.05 5915 3.75 7708 3.78 6936
Sha e o Coun-
y Sen ences in
Annual Repo s
3.66 5391 3.34 5915 4.23 7708 3.63 6936
No es: his able p esen s summa y s a is ics o ou main ou come a iables o in e es and i s indi idual
componen s a he i m-yea obse a ion le el. All a iables a e de ined in Table 1. I a i m does no
disclose any sensi i e geog aphic segmen in o ma ion ( ows (1)–(3)), he measu e o sensi i e geog aphic
in o ma ion o ha i m is equal o ze o. This explains ha he a e age alue o he composi e measu e is
lowe han i s indi idual componen s. The same holds ue o insensi i e geog aphic segmen disclosu e,
albei he e he disclosu e o i s cons i uen s (disclosed e enues and asse s) is highe . A e age alues and
obse a ions a e spli up acco ding o whe he obse a ions belong o he ea ed o con ol g oup be o e
o a e ea men . The analysis p oceeds a he unique i m-yea le el
Table 4 epo s desc ip i e s a is ics o ou disclosu e a iables o in e es . We
epo hese sepa a ely o i ms below he coun y-speci ic h eshold (con ol g oup)
and i ms abo e he h eshold ( ea men g oup), bo h be o e and a e he in oduc-
ion o CbCR. Fi s , no e ha i ms in he ea ed g oup o m he majo i y o i ms
wi hin he o e all sample. Sensi i e and insensi i e geog aphic segmen s a e dis-
closed a a highe a e o he ea ed g oup han o con ol i ms, bo h be o e and
a e he in oduc ion o CbCR. Simila ly, ex ual geog aphic segmen in o ma ion
is also disclosed mo e o en by ea ed i ms han by con ol i ms h oughou he
obse ed pe iod. Bo h obse a ions ela e o la ge i ms possibly being mo e ex-
posed o in e na ional business ac i i ies han smalle i ms, which we accoun o
in ou ollowing eg ession se ing h ough con ol a iables. Fig. 1depic s he de-
elopmen o absolu e le els o disclosu e ela i e o he in oduc ion o CbCR. One
can see di ec ly ha while sensi i e and insensi i e disclosu e o quan i a i e geo-
g aphic in o ma ion is ela i ely s able ac oss ime, quali a i e disclosu e o coun y
in o ma ion dec eases o bo h he ea ed and he con ol g oup o i ms.
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550 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Fig. 1 Disclosu e Le els Be o e
and A e In oduc ion o CbCR.
No es: his igu e p o ides he
de elopmen o he mean le els
o he h ee ou comes a iables
o in e es o e ime. The i s
wo sub igu es p o ide a e age
alues o quan i a i e disclo-
su e o insensi i e and sensi i e
geog aphic in o ma ion, mea-
su ed in segmen coun s. The
hi d sub igu e shows he sha e
o coun y sen ences in annual
epo s. Values a e condi ional
on whe he i ms belong o he
ea men g oup (blue) o con-
ol g oup ( ed). The ho izon al
axis p o ides he yea s ela i e
o CbCR implemen a ion, wi h
a ela i e yea equal o ze o
deno ing he onse o CbCR
Table 5 epo s desc ip i e s a is ics o i ms sepa a ely by ea men g oup and
con ol g oup. By na u e, ea ed i ms ha e subs an ially highe consolida ed e -
enues han he con ol i ms. The same holds ue o he numbe o employees and
o eign subsidia y coun as well as he olume o o al asse s. Simila ly, i ms in
he ea ed g oup a e mo e le e aged, e lec ing di e ences in access o capi al ma -
ke s o isk p o iles. S ill, he a ia ion especially wi hin he g oup o la ge i ms
is subs an ial, as exempli ied by he di e ences be ween median and mean alues.
Mo ing om di e ences in absolu e alues (which esul om ou classi ica ion in
ea men and con ol g oup based on a size c i e ion) o ela i e di e ences, one
can obse e ha i ms a e also simila along se e al dimensions: hey a e simila ly
p o i able (measu ed by e u n on asse s), hey ha e a simila sha e o in angible as-
se s and hey bo h ha e a e age e ec i e book ax a es closely below hi y pe cen .
A no ewo hy di e ence conce ns he sha e o subsidia ies in ax ha ens, which is
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Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 551
Table 5 Desc ip i e S a is ics by T ea men S a us
Below CbCR Th eshold (con ol) Abo e CbCR Th eshold ( ea ed)
Va iables p25 p50 p75 Mean p25 p50 p75 Mean
Insensi i e geog aphic in o ma ion 1 3 5 3.41 2 3 5 3.91
Sensi i e geog aphic in o ma ion 0 0 1 0.64 0 0 1 0.84
Quali a i e geog aphic in o ma ion 2 3 5 4.03 2 3 6 4.20
Fi mage 1527503819357651
Numbe o employees 642 1306 2598 2376 5129 11,613 27,415 30,787
Le e age 0.30 0.43 0.56 0.44 0.45 0.58 0.69 0.57
In angibles 0.01 0.07 0.28 0.16 0.03 0.14 0.33 0.20
Re u n on asse s 0.04 0.07 0.12 0.09 0.04 0.07 0.11 0.08
Fi m size (EUR Mio.) 180 354 681 678 1669 3726 10,546 12,539
Tu no e (EUR Mio.) 167 304 498 361 1508 3044 7879 9238
Book ETR 0.19 0.26 0.33 0.28 0.21 0.28 0.34 0.29
Fo eign subsidia ies 4 12 25 21 16 58 162 181
Sha e o ax-ha en subsidia ies 0.00 0.08 0.24 0.17 0.02 0.07 0.15 0.12
Numbe o i m-yea obse a ions 11,360 14,644
No es: his able p o ides summa y s a is ics o ou come and con ol a iables, spli up in o wo ca ego ies: whe he a i m is loca ed abo e he CbCR h eshold (columns (5)–(8)
o he igh ) o no (columns (1)–(4) o he le ). P25/P50/P75 deno e he espec i e 25, 50 o 75%-pe cen ile in columns (1)–(3) and (5)–(7). Columns (4) and (8) p o ide
he a e age alue o he a iable. De ailed a iable desc ip ion is p o ided in Table 1. Fi m size in his able is measu ed in EUR Mio. wi hou aking he na u al loga i hm.
Va iable sha es (i.e. le e age, in angibles, e u n on asse s, book ETR and sha e o ax-ha en subsidia ies) a e p o ided as decimal numbe s
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552 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
highe o i ms in he con ol g oup. This su p ises inso a as i ms in he ea ed
g oup ha e a subs an ially highe o eign p esence measu ed by he numbe o o -
eign subsidia ies. A possible explana ion could be ha he exis ence o ax planning
mo i a ions equi es a minimal se up o i ms in ax ha ens, which becomes mo e
ob ious in ela i e e ms o i ms ha do no ha e a subs an ial o e all le el o
o eign ac i i y.
4Resul s
4.1 DiD Resul s
We p o ide he esul s o ou baseline DiD eg ession o ou h ee dependen a i-
ables o in e es in Table 6. These esul s cap u e he a e age e ec o he p i a e
CbCR on public disclosu e decisions. We i s conside ou baseline eg ession e-
sul s in columns (1), (3) and (5) wi hou con ol a iables. The coe icien on he
in e ac ion e m o T ea iand Pos is nega i e ac oss all h ee speci ica ions, and
s a is ically signi ican o sensi i e and quali a i e geog aphic disclosu e. P i a e
CbCR leads o less disclosu e o sensi i e geog aphic in o ma ion by 0.075 segmen
coun s. Disclosu e o quali a i e geog aphic in o ma ion dec eases by 0.339 pe cen -
age poin s. While he magni ude o bo h e ec s seems somewha small, one should
keep in mind ha he a e age ea ed i m only epo s 0.84 geog aphic segmen s
wi h sensi i e in o ma ion, implying a dec ease o abou 8.9%. Likewise, he sha e
o coun y sen ences in annual epo s is a abou 4.2 pe cen age poin s on a e age,
yielding a simila ela i e dec ease o abou 8.1%. Unlike he o he wo ou come
a iables, he disclosu e o insensi i e geog aphic in o ma ion does no seem o be
a ec ed by CbCR. Ou eg ession esul s a e obus o he coun y-wise exclusion
o i ms om he sample, implying ha coun y-speci ic phenomena do no d i e
ou esul s.16
Ou indings a e also obus o he inclusion o con ol a iables in columns (2),
(4) and (6), e en hough no all i ms a e e ained in he sample because o missing
alues in con ol a iables. While sensi i e geog aphic disclosu e dec eases mo e
s ongly when con olling o ele an a iables, he dec ease in quali a i e geo-
g aphic in o ma ion is sligh ly less p onounced. Conce ning he ele ance o he
con ol a iables, we obse e ha i m size and a la ge coun o o eign subsidia ies
posi i ely a ec he disclosu e o bo h insensi i e and quali a i e geog aphic in o -
ma ion. In e es ingly, bo h ac o s seem o play no ole o sensi i e in o ma ion
disclosu e. Ins ead, i ms wi h a la ge sha e o in angible asse s a e disclosing
subs an ially less sensi i e in o ma ion a a geog aphic le el, amoun ing o 0.032
16 We also a y he dependen a iable o quali a i e geog aphic disclosu e o include no only indi idual
coun ies, bu o condi ion on he coun y being men ioned in he same sen ence as he wo d “ ax”. We
do no ind any signi ican disclosu e esponse in his case. We a ibu e his o he espec i e a e age
ou come alue being e y low (0.132 pe cen age poin s) in compa ison o he ini ial ou come a iable
ha includes any sen ence wi h a coun y men ion (3.75 pe cen age poin s). The e is hus less downwa d
esponse possible o a a iable ha condi ions on bo h coun ies and axes being men ioned in he same
sen ence
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 553
Table 6 E ec o CbCR on Disclosu e Beha io
(1) (2) (3) (4) (5) (6)
Va iables Insensi i e geog aphic in o ma ion Sensi i e geog aphic in o ma ion Quali a i e geog aphic in o ma ion
Pos X T ea –0.0567 –0.080 –0.0664*** –0.075*** –0.349*** –0.339***
(–1.114) (–1.210) (–2.756) (–2.794) (–5.680) (–4.717)
Fi m size – 0.347*** – 0.003 – 0.395***
– (3.555) – (0.060) – (5.078)
Sha e o in angible
asse s
– –0.165 – –0.322** – 0.176
– (–0.553) – (–2.322) – (0.531)
Re u n on asse s – 0.243 – 0.210 – –0.426
– (0.454) – (0.859) – (–0.655)
Re u n on sales – –0.333 – –0.125 – 0.941*
– (–0.758) – (–1.091) – (1.941)
Le e age – –0.098 – 0.010 – 0.840***
– (–0.429) – (0.108) – (3.674)
Fo eign subsidia y
coun (loga i hm)
– 0.089*** – 0.001 – 0.082**
– (3.393) – (0.057) – (2.197)
Sha e o ax-ha en
subsidia ies
– 0.219 – 0.030 – –0.191
– (1.613) – (0.598) – (–1.108)
Book ETR – – – – – –0.073
– – ––– (–0.675)
Fog-Index – – – – – –0.264***
– – ––– (–5.542)
K
554 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Table 6 (Con inued)
(1) (2) (3) (4) (5) (6)
Va iables Insensi i e geog aphic in o ma ion Sensi i e geog aphic in o ma ion Quali a i e geog aphic in o ma ion
Sen ence coun
(loga i hm)
– – – – – –0.539***
– – – – – (–3.814)
Nega i i y sco e –––––0.004
– – – – – (0.753)
Posi i i y sco e – – – – – 0.061***
– – – – – (5.650)
Unce ain y Sco e – – – – – –0.108***
– – – – – (–5.940)
Cons an 3.468*** –1.529 0.680*** 0.722 3.821*** 6.599***
(232.1) (–1.141) (90.42) (1.128) (166.3) (4.078)
Obse a ions 25,643 19,214 25,643 19,214 25,643 18,148
Adj. R-squa ed 0.868 0.869 0.850 0.858 0.802 0.798
Fixed E ec s Fi m & Yea Fi m & Yea Fi m & Yea Fi m & Yea Fi m & Yea Fi m & Yea
Clus e ed SE Fi m Fi m Fi m Fi m Fi m Fi m
Con ols No Yes No Yes No Yes
No es: his able p esen s he esul s o es ima ing Eq. 1using O dina y Leas Squa es o ou o e all i m sample desc ibed on Table 2and 3. We de ine all a iables in
Table 1and Sec . 3.1.1. All columns include ixed e ec s a he i m-yea le el. The ow named ‘Con ols’ speci ies whe he he con ol a iables men ioned in Sec . 3.1.1 a e
included. Columns (2), (4) and (6) include con ol a iables. The obse a ion numbe be ween columns (2) and (4) and column (6) di e s because he se o con ol a iables
sligh ly a ies o accoun o he di e en na u e o quali a i e geog aphic disclosu e. All columns include s anda d e o s clus e ed a he i m-le el. Values in pa en heses
ep esen obus -s a is ics
***, **, and * deno e signi icance a he one-, i e-, and en-pe cen le el o wo-sided es s o signi icance
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 555
segmen coun s less pe 10 pe cen age poin inc ease in he in angible sha e. This
inding is consis en wi h conside a ions o p op ie a y cos s playing a ole in he de-
cision o olun a ily disclose sensi i e inancial in o ma ion a a de ailed geog aphic
le el.
An essen ial iden i ying assump ion o DiD designs is ha a ec ed i ms and
con ol i ms would ha e de eloped simila ly wi h espec o hei disclosu e deci-
sions absen he policy e o m (Ang is and Pischke 2014). This condi ion is usu-
ally conside ed o hold i bo h g oups ollow a pa allel end be o e he ea men .
We in es iga e he dynamic e ec and e i y he plausibili y o pa allel ends us-
ing an e en s udy speci ica ion o ou h ee ou come a iables (Schmidheiny and
Siegloch 2023; Fues e al. 2018). To his end, we eplace he e m T ea iPos
om Eq. 1wi h a sequence o bina y ea men a iables deno ed by PkD3
kD5ˇkDk;
ha indica e kpe iods p io and pos e io o he in oduc ion o CbCR. We use he
iden ical s uc u e o ixed e ec s and he same clus e ing p ocedu e o s anda d
e o s as in Eq. 1wi hou con ol a iables. In Fig. 2, we plo he esul ing e-
g ession coe icien s o i e yea s p io o and h ee yea s a e he ea men . The
e ec is es ima ed ela i e o he con ol g oup and no malized o he yea p io
o he implemen a ion o CbCR. We obse e no signi ican p e- ends o sensi i e
and quali a i e geog aphic in o ma ion. Disclosu e o insensi i e geog aphic in o -
ma ion shows a sligh p e- end, hence he espec i e esul s should be in e p e ed
mo e cau iously. The dynamic pa e ns also e eal ha while he disclosu e o qual-
i a i e geog aphic in o ma ion dec eased di ec ly a e he in oduc ion o CbCR,
i ms we e no immedia ely adjus ing hei public disclosu e o sensi i e geog aphic
in o ma ion. Ins ead, i ms seem o ha e changed hei disclosu e beha io o sen-
si i e geog aphic in o ma ion only a e lea ning abou po en ial esponses by iscal
au ho i ies.
O e all, ou indings suppo he no ion ha he implemen a ion o manda o y
p i a e disclosu e ules induced nega i e public disclosu e esponses. So a , empi -
ical assessmen s o disclosu e heo y ha e ein o ced he belie in a complemen a y
ela ionship be ween p i a e and public disclosu e (Bozanic e al. 2017). On he
con a y, ou esul s e eal he opposi e pa e n: i ms’ public disclosu e o geo-
g aphic in o ma ion dec eases when p i a e CbCR is in oduced. This implies ha
bo h ypes o disclosu e can also be subs i u es. This e ec can be explained by he
a gumen s b ough o wa d in Sec . 2.2.
Fi s , he ea o i ms o possibly include numbe s in hei public epo ing ha a e
di icul o squa e wi h inancial igu es p i a ely epo ed o iscal au ho i ies migh
make hem mo e hesi an o olun a ily disclose u he geog aphic in o ma ion o
he public. This ea o con adic ion could a ise due o a ying accoun ing s anda ds
be ween epo s iled o accoun ing and ax pu poses. Mo eo e , he agg ega ion o
inancial igu es ac oss di e en geog aphic egions can lead o inconsis encies, pa -
icula ly o sensi i e, p o i - ela ed i ems. On he con a y, insensi i e in o ma ion
disclosu e, which does no eac o CbCR implemen a ion, pe ains o in o ma ion
ha is no o p ima y ele ance o iscal au ho i ies, as e enues and asse s a e no
as di ec ly linked o he ax bu den. Also, unlike olun a y disclosu e o sensi i e
in o ma ion, i is bounded om below by IFRS egula ion. Second, i ms educe
hei olun a y epo ing o geog aphic in o ma ion o lowe he isk ha someone
K
556 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Fig. 2 E en S udy o As-
sessing P e- ends in Ou come
Va iables. No es: his igu e p o-
ides he coe icien s ob ained
om es ima ing e en s udy
eg essions o he h ee ou -
comes a iables o in e es (see
Sec . 4.1 o u he de ail). Poin
es ima es ( ed) deno e he coe -
icien es ima es o ea men in
he pe iods be o e and a e he
ac ual ea men by CbCR. Blue
whiske s indica e he espec-
i e 95% con idence in e als.
All coe icien s a e es ima ed
ela i e o he no maliza ion pe-
iod –1. Coe icien es ima es in
pe iods –5 and +3 (g een) a e
binned o o he le and o he
igh o he sample. This implies
ha coe icien s o pe iods –5
and +3 con ol o any long-
e m p io o pos e io e ec s.
S anda d e o s unde lying he
con idence in e als a e obus o
he e oscedas ici y and clus e ed
a he i m le el
aises suspicion abou disc epancies be ween he i m’s public geog aphic disclosu e
and he deemed ac ual beha io o he i m. This isk is mo e cos ly a e CbCR,
because he public may exe p essu e on iscal au ho i ies o use i s access o ull
CbCR in o ma ion and in es iga e u he .
We u he assess po en ial channels ha migh be d i ing ou main esul s. We
conside wo aspec s ha could in luence he deg ee o which i ms a ec ed by
CbCR adjus hei disclosu e choices: he ole o ax en o cemen and he deg ee o
in a- i m complexi y as measu ed by i s in e na ional p esence ( ia subsidia ies).
Th oughou his sec ion, we assess he he e ogenei y o ou main esul s by modi-
ying ou baseline DiD app oach as depic ed in Eq. 1as ollows: we eplace ou se
o DiD coe icien s .ˇ1T ea iPos
) wi h he e m .ˇ1T ea iPos
/xZi,whe e
Zideno es a bina y a iable ha changes o each o he h ee subg oups o in e es
and is cons an a he i m le el. E ec i ely, we hence es ima e a di e ence-in-di -
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 563
Table 10 RDD Resul s Wi hou Obse a ions Close o he Th eshold
(1) (2) (3) (4) (5) (6)
Va iables Insensi i e geog aphic in o ma ion Sensi i e geog aphic in o ma ion Quali a i e geog aphic in o ma ion
Abo e CbCR Th eshold 0.354 0.124 –0.190 –0.174 –0.578 –0.746**
(0.707) (0.409) (–1.065) (–1.275) (–1.052) (–2.162)
Di e ence o CbCR
Th eshold
–0.006 0.001 –0.003 –0.001 0.001 0.005
(–0.915) (0.485) (–0.951) (–0.983) (0.094) (1.553)
Abo e CbCR Th eshold X 0.008 –0.001 0.009** 0.004* 0.001 –0.002
Di e ence o CbCR Th esh-
old
(0.796) (–0.349) (2.058) (1.900) (0.114) (–0.520)
Cons an 2.854*** 3.162*** 0.466*** 0.564*** 3.693*** 3.849***
(9.212) (14.505) (3.761) (5.615) (8.522) (13.048)
Obse a ions 541 1,162 541 1,162 541 1,162
Bandwid h (in EUR Mio.) 150 300 150 300 150 300
No es: his able p esen s esul s o es ima ing Eq. 2using O dina y Leas Squa es o a subse o i m-yea s wi h u no e alues wi hin a na ow bandwid h a ound he
CbCR h eshold a e he in oduc ion o CbCR. We de ine all a iables in Table 1and Sec . 3.1.2. Row (1) depic s ou coe icien s o in e es , i.e. he local discon inui ies
ha iden i y he ea men e ec o CbCR. Changes o geog aphic in o ma ion disclosu e a e es ima ed o i ms inside a symme ic C150Mio. bandwid h a ound he CbCR
h eshold in columns (1), (3) and (5). A la ge bandwid h o C300Mio. is used o columns (2), (4) and (6). In addi ion, we exclude u no e obse a ions loca ed di ec ly
a ound he CbCR h eshold wi hin a C10 Mio. bin, i.e. C5 Mio. below and abo e he h eshold. S anda d e o s a e clus e ed a he i m le el. Values in pa en heses ep esen
obus -s a is ics
***, **, and * deno e signi icance a he one-, i e-, and en-pe cen le el o wo-sided es s o signi icance
K
564 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Fig. 4 RDD Resul s Wi hou Obse a ions Close o he Th eshold. No es: his igu e isualizes he esul s
o he eg ession discon inui y design o he h ee geog aphic epo ing ou comes depic ed in Table 10.
I includes i m-yea obse a ions in he pe iod a e he in oduc ion o CbCR wi hin a bandwid h o
C150Mio. (le panel) and C300 Mio. ( igh panel) a ound he CbCR h eshold. In each sub igu e, he
ho izon al axis p o ides he dis ance o he CbCR h eshold. The colo ed do s ep esen binned alues o
he espec i e geog aphic disclosu e below (blue) and abo e ( ed) he CbCR h eshold. Fi ms wi h u no e
wi hin a bin o C10 Mio. a ound he CbCR h eshold a e excluded. The e ec o CbCR on geog aphic
epo ing can be isually iden i ied as he local di e ence in he linea end abo e (o ange line) and below
(g een line) he CbCR h eshold ( e ical ed dashed line)
om a lowe le el o geog aphic disclosu e han hei lis ed coun e pa s. Hence
he imp o emen in he in o ma ion en i onmen due o he in oduc ion o CbCR
could domina e he ea o con adic ion be ween p i a e and public epo ing. This
migh en ail a mu ed nega i e o e en posi i e public disclosu e esponse. Second,
majo i y owne s o hese i ms may ha e s ong p e e ences ha hei i m adhe es
o a speci ic policy o anspa ency. This could widen he dispe sion o disclosu e
esponses.
A las ca ea ela es o ou choice o public disclosu e o geog aphic in o ma ion
as a possible ou come a ec ed by CbCR. Ou esul s sugges ha public disclosu e o
sensi i e and quali a i e geog aphic in o ma ion aces subs an ial p op ie a y cos s
ela ed o p o iding aluable in o ma ion o compe i o s and/o bea ing he conse-
quences o public sc u iny. Howe e , he public disclosu e esponse could change
when conside ing o he disclosu e dimensions wi h lowe p op ie a y cos s, such as
he disclosu e o e ec i e ax a e o ecas s. This would also econcile ou indings
wi h con e se esul s om o he s udies.18
18 Conside o ins ance Chi e al. (2023).
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 565
Table 11 RDD Resul s Be o e he In oduc ion o CbCR
(1) (2) (3) (4) (5) (6)
Va iables Insensi i e geog aphic in o ma ion Sensi i e geog aphic in o ma ion Quali a i e geog aphic in o ma ion
Abo e CbCR Th eshold 0.341 0.395 –0.077 –0.017 0.436 0.354
(0.690) (1.196) (–0.417) (–0.130) (0.835) (0.971)
Di e ence o CbCR
Th eshold
–0.000 –0.002 0.002 –0.000 –0.015* –0.004
(–0.074) (–1.016) (0.712) (–0.056) (–1.837) (–1.452)
Abo e CbCR Th eshold X –0.002 0.002 –0.001 0.000 0.016 0.002
Di e ence o CbCR Th esh-
old
(–0.174) (0.533) (–0.364) (0.262) (1.502) (0.486)
Cons an 3.200*** 3.145*** 0.700*** 0.660*** 3.138*** 3.407***
(9.668) (13.008) (4.565) (5.848) (10.069) (14.240)
Obse a ions 577 1179 577 1179 577 1179
Bandwid h (in EUR Mio.) 150 300 150 300 150 300
No es: his able p esen s esul s o es ima ing Eq. 2using O dina y Leas Squa es o a subse o i m-yea s wi h u no e alues wi hin a na ow bandwid h a ound he
CbCR h eshold p io o he in oduc ion o CbCR. We de ine all a iables in Table 1and Sec . 3.1.2. Row (1) depic s ou coe icien s o in e es , i.e. he local discon inui ies
ha iden i y he ea men e ec o CbCR. Local changes o geog aphic in o ma ion disclosu e a e es ima ed o i ms inside a symme ic C150 Mio. bandwid h a ound he
CbCR h eshold in columns (1), (3) and (5). A la ge bandwid h o C300Mio. is used o columns (2), (4) and (6). S anda d e o s a e clus e ed a he i m le el. Values in
pa en heses ep esen obus -s a is ics
***, **, and * deno e signi icance a he one-, i e-, and en-pe cen le el o wo-sided es s o signi icance
K
566 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Fig. 5 RDD Resul s Be o e he In oduc ion o CbCR. No es: his igu e isualizes he esul s o he e-
g ession discon inui y design o he h ee geog aphic disclosu e ou comes depic ed in Table 11. I includes
i m-yea obse a ions in he pe iod a e he in oduc ion o CbCR wi hin a bandwid h o C150Mio. (le
panel) and C300Mio. ( igh panel) a ound he CbCR h eshold. In each sub igu e, he ho izon al axis
p o ides he dis ance o he CbCR h eshold. The colo ed do s ep esen binned alues o he espec i e
geog aphic disclosu e below (blue) and abo e ( ed) he CbCR h eshold. The e ec o CbCR on geog aphic
disclosu e can be isually iden i ied as he local di e ence in he linea end abo e (o ange line) and below
(g een line) he CbCR h eshold ( e ical ed dashed line)
Fo la ge i ms ac i e in he Eu opean Union, public CbCR will become manda-
o y o inancial yea s s a ing a e 21 June 2024. Gi en he implici ly documen ed
impo ance o p op ie a y cos s o he i ms’ disclosu e choices in ou se ing, pol-
icy make s should wa ch ca e ully whe he he e a e any signs ha i ms subjec
o he new egula ion a e pu a a disad an age ela i e o compe i o s no subjec
o he egula ion. I ha is he case, a e ised egula ion should include a ge ed
ca e-ou ules, which apply o sub-i ems ha a e published wi h a su icien delay.
A e such a pe iod, he ele an in o ma ion may no be aluable o compe i o s
anymo e and would become public. A gene ous o m o such a ca e-ou ule is pa
o he cu en Eu opean di ec i e on public CbCR, which p o ides a pe iod o up
o i e yea s du ing which disclosu e o comme cially sensi i e in o ma ion may be
de e ed.19 Ano he mo e es ic i e al e na i e would be a ee schedule acco ding
o which i ms pay inc easing con ibu ions o longe delays in i em publica ion. In
such a scena io, i ms o which p op ie a y cos s play a signi ican ole would pay
19 This de e al is condi ional on he in o ma ion no pe aining o ax ha en ope a ions (Di ec i e
2021/2101/EU).
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 567
Table 12 RDD Resul s Be o e he In oduc ion o CbCR Wi hou Obse a ions Close o he Th eshold
(1) (2) (3) (4) (5) (6)
Va iables Insensi i e geog aphic in o ma ion Sensi i e geog aphic in o ma ion Quali a i e geog aphic in o ma ion
Abo e CbCR Th eshold 0.235 0.361 –0.045 0.008 0.852 0.540
(0.399) (1.034) (–0.218) (0.059) (1.371) (1.384)
Di e ence o CbCR
Th eshold
0.003 –0.002 0.002 –0.000 –0.014 –0.004
(0.379) (–0.656) (0.666) (–0.126) (–1.613) (–1.224)
Abo e CbCR Th eshold X –0.007 0.001 –0.002 0.000 0.008 –0.001
Di e ence o CbCR Th esh-
old
(–0.552) (0.250) (–0.469) (0.203) (0.634) (–0.132)
Cons an 3.378*** 3.214*** 0.695*** 0.652*** 3.145*** 3.453***
(7.910) (11.743) (4.594) (5.873) (8.642) (13.354)
Obse a ions 534 1136 534 1136 534 1136
Bandwid h (in EUR Mio.) 150 300 150 300 150 300
No es: his able p esen s esul s o es ima ing Eq. 2using O dina y Leas Squa es o a subse o i m-yea s wi h u no e alues wi hin a na ow bandwid h a ound he
CbCR h eshold p io o he in oduc ion o CbCR. We de ine all a iables in Table 1and Sec . 3.1.2. Row (1) depic s ou coe icien s o in e es , i.e. he local discon inui ies
ha iden i y he ea men e ec o CbCR. Changes o geog aphic in o ma ion disclosu e a e es ima ed o i ms inside a symme ic C150Mio. bandwid h a ound he CbCR
h eshold in columns (1), (3) and (5). A la ge bandwid h o C300Mio. is used o columns (2), (4) and (6). In addi ion, we exclude u no e obse a ions loca ed di ec ly
a ound he CbCR h eshold wi hin a C10 Mio. bin, i.e. C5 Mio. below and abo e he h eshold. S anda d e o s a e clus e ed a he i m le el. Values in pa en heses ep esen
obus -s a is ics
***, **, and * deno e signi icance a he one-, i e-, and en-pe cen le el o wo-sided es s o signi icance
K
568 Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571
Fig. 6 RDD Resul s Be o e he In oduc ion o CbCR Wi hou Obse a ions Close o he Th eshold.
No es: his igu e isualizes he esul s o he eg ession discon inui y design o he h ee geog aphic
disclosu e ou comes depic ed in Table 12. I includes i m-yea obse a ions in he pe iod a e he in o-
duc ion o CbCR wi hin a bandwid h o C150Mio. (le panel) and C300Mio. ( igh panel) a ound he
CbCR h eshold. In each sub igu e, he ho izon al axis p o ides he dis ance o he CbCR h eshold. The
colo ed do s ep esen binned alues o he espec i e geog aphic disclosu e below (blue) and abo e ( ed)
he CbCR h eshold. Fi ms wi h u no e wi hin a bin o C10 Mio. a ound he CbCR h eshold a e ex-
cluded. The e ec o CbCR on geog aphic disclosu e can be isually iden i ied as he local di e ence in
he linea end abo e (o ange line) and below (g een line) he CbCR h eshold ( e ical ed dashed line)
a ee o compensa e o opaqueness. An unin ended consequence o such a policy
design could be, howe e , ha a ec ed i ms mo e hei co po a e headqua e s o
loca ions wi h sui able ca e-ou ules o a mo e lenien egula ion en o cemen .
Such eac ions o mul ina ional co po a ions wi h ele an p op ie a y cos s could
be akin o hose documen ed in he li e a u e on co po a e ax a oidance, pa icula ly
in he con ex o co po a e in e sions (Desai and Hines 2002; Voge 2011).
6 Appendix
6.1 Download o Annual Repo s om Filings Expe
We begin by iden i ying documen s classi ied as English language annual epo s
by he da a p o ide o all coun ies (excep o he US)20, which lea es us wi h
oughly 300,000 documen s and 46,000 unique i ms. Since he companies do no
20 In he US, he Fo m 10-K a e highly s anda dized. The e o e, epo s a e equen ly used in he accoun -
ing li e a u e (Li 2010; Lough an and McDonald 2011). Howe e , we also wan o ocus on less egula ed,
K
Schmalenbach Jou nal o Business Resea ch (2024) 76:533–571 569
ha e a common iden i ie (i.e., ISIN, e c.), we c ea e a lis o all companies o
which we obse e annual epo s. In he nex s ep, we ma ch ha lis based on i m
name and coun y o inco po a ion wi h he i ms om B D’s O bis da abase, which
p o ides us wi h i m inancials and in o ma ion abou he s uc u e o he co po a e
g oup including subsidia ies. Fo he ma ched i ms, we e ie e he annual epo s
au oma ically o cons uc ou sample o ex co po a. The ile o ma o he doc-
umen s is s anda d PDF which mus be con e ed o machine- eadable ex o ma .
Be o e he ex iles can be used o ex ual analysis, ex aneous a ibu es as well
as o he a i ac s (i.e., g aphs and ables, e c.), mus be excluded because hey a e
di icul o analyze and likely o add noise o he analysis (Lough an and McDonald
2016). Subsequen ly, he emaining ex elemen s a e pa sed in o sen ences. Man-
ual inspec ion e eals ha some documen s classi ied as annual epo s a e ou h-
qua e in e im epo s o annual esul s con aining only basic inancial s a emen
in o ma ion. We hus equi e each documen o men ion he big am “annual epo ”
on he i s wo pages o ensu e ha he emaining documen s a e indeed annual
epo s wi h a ich se o na a i e disclosu es. We e i ied o a ep esen a i e sub-
se o i ms ha he esul ing documen s coincide wi h he ele an annual epo s
published on hei websi e. Hence, whene e a i m p o ides an in eg a ed epo
wi h addi ional in o ma ion on hei websi e, he comple e documen is used in ou
da a.
Acknowledgemen s We a e g a e ul o he gues edi o , Tho s en Sellho n, and wo anonymous e e ees
o e y aluable commen s and sugges ions. We hank Je Hoopes, semina pa icipan s a he Uni e si y
o Mannheim and pa icipan s a he TRR 266 Annual Con e ence 2019, he DIBT Wo kshop on Manda-
o y Disclosu e Rules 2021 a he WU Uni e si y o Vienna and he Join Wo kshop on Business Taxa ion
2020 a he Uni e si y o B escia o help ul eedback and sugges ions on ea lie e sions o his pape .
We hank Mo i z Pila ski o ou s anding esea ch assis ance.
Funding We g a e ully acknowledge unding om he Leibniz Science Campus MannheimTaxa-
ion, om he Deu sche Fo schungsgemeinscha (DFG, Ge man Resea ch Founda ion)—P ojec -ID
403041268—TRR 266, and om he G adua e School o Economic and Social Sciences o he Uni e si y
o Mannheim.
Con lic o in e es R. Mülle , J. Voge and J. Zen al decla e ha hey ha e no compe ing in e es s.
Open Access This a icle is licensed unde a C ea i e Commons A ibu ion 4.0 In e na ional License,
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Publishe ’s No e Sp inge Na u e emains neu al wi h ega d o ju isdic ional claims in published maps
and ins i u ional a ilia ions.
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