Effects of Demand-driven Disclosures in Tax and Sustainability

Tax avoidance by multinational enterprises has attracted a lot of public attention recently and elicited calls for regulatory changes to increase tax transparency, for example, by sustainability reporting. Kronenberger and Simons theoretically investigate how the changing information environment for nonfinancial disclosures impact firms’ activities, such as production choices or ESG investments. In this setting, real effects can result because mandatory disclosure eliminates nondisclosures of bad firms but also reduces the possibility of signaling good news by disclosing voluntarily (unraveling from the top). As such, B06 also provides theoretical input to the empirical projects studying the real effects of corporate transparency.

  • Forschungsfrage

    How does the changing information environment for nonfinancial disclosures impact firms' activities, such as production or location choices or ESG-investments?

  • Motivation zur Forschung

    Stakeholders increasingly voice their desire for transparency about corporate activities. This observation has manifest itself in the current push for sustainability reporting worldwide. Similarly, fiscal authorities
    aim to expand disclosure requirements. Private Country-by-Country-Reporting (CbCR) improves the tax authorities’ own information endowment by increasing the information transmission to the tax authority. Public CbCR takes this concept a step further by requiring public disclosures to all interested stakeholders; however, trying to serve multiple receivers can harm the clarity in the sense of comprehensibility of the information provided to the receivers. In a similar fashion, the global reporting initiative (GRI) includes a tax-related section in the guidelines on environmental, social or governmental (ESG) reporting as of 2019. Thus tax and sustainability disclosures are undeniably intertwined. For this reason, we pose the question how the changing information environment for nonfinancial disclosures impacts firms’ activities, such as production, location choices, or ESG investments.

  • Forschungsprogramm

    Specifically, we analyze optimal choices in settings characterized by multiple receivers and potential goal conflicts, trading off legality and legitimacy involving various reporting formats as well as uncertainty about receivers’ responses to information.

  • Research Contribution

    Our results should inform firms about the optimal tax and sustainability disclosure strategies.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der Goethe-Universität Frankfurt, der WHU – Otto Beisheim School of Management und der Universität zu Köln, die die gleiche Forschungsagenda verfolgen.