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The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad

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  • THOMAS RAUTER

Abstract

I examine how mandatory extraction payment disclosures (EPD)—a policy solution intended to discourage corporate payment avoidance in the oil, gas, and mining industries—affect fiscal revenue contributions and investments by multinational firms in foreign host countries. Using the staggered adoption of EPD across firms headquartered in Europe and Canada, I find that disclosing companies increase their payments to host governments, decrease investments, and obtain fewer extraction licenses relative to non‐disclosing competitors. These effects are stronger for firms that face a high risk of public shaming, operate in corrupt host countries, and have a high exposure to bribery‐prone payments, suggesting that EPD increases the reputational cost of corporate behavior that could be perceived as exploitative. The resulting reallocation of investments from disclosing to non‐disclosing firms reduces drilling productivity and resource production in host countries, consistent with uneven disclosure regulation distorting capital allocation.

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  • Thomas Rauter, 2020. "The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad," Journal of Accounting Research, Wiley Blackwell, vol. 58(5), pages 1075-1116, December.
    • Handle: RePEc:bla:joares:v:58:y:2020:i:5:p:1075-1116
    DOI: 10.1111/1475-679X.12332
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    5. Christensen, Hans B. & Maffett, Mark & Rauter, Thomas, 2020. "Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development," Working Papers 304, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    6. Elayan, Fayez A. & Pacharn, Parunchana & Li, Jennifer & Brown, Kareen & Chen, Yijia, 2023. "The market response to mandatory disclosure of payments to foreign governments," The British Accounting Review, Elsevier, vol. 55(6).
    7. Darendeli, Alper & Fiechter, Peter & Hitz, Jörg-Markus & Lehmann, Nico, 2022. "The role of corporate social responsibility (CSR) information in supply-chain contracting: Evidence from the expansion of CSR rating coverage," Journal of Accounting and Economics, Elsevier, vol. 74(2).
    8. Dutt, Verena K. & Spengel, Christoph & Vay, Heiko, 2021. "The EU proposal for country-by-country reporting on the internet: Costs, Benefits and Consequences," Studien, Stiftung Familienunternehmen / Foundation for Family Businesses, number 250025.
    9. Sorabh Tomar, 2023. "Greenhouse Gas Disclosure and Emissions Benchmarking," Journal of Accounting Research, Wiley Blackwell, vol. 61(2), pages 451-492, May.
    10. Müller, Raphael & Spengel, Christoph & Vay, Heiko, 2020. "On the determinants and effects of corporate tax transparency: Review of an emerging literature," ZEW Discussion Papers 20-063, ZEW - Leibniz Centre for European Economic Research.
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