Intra-industry spillovers of profit shifting and investments in tax havens

Do firms replicate the tax avoidance schemes of their peers? The present paper provides evidence along these lines. An event study shows that a US-listed enterprise is more likely to enter a specific tax haven if another US-listed enterprise operating in the same sector already owns subsidiaries in that tax haven. The inclusion of three-way fixed effects, the absence of pre-trends, and several robustness checks consolidate the results. Moreover, profit shifting spillovers vary over time, across sectors, and by tax haven. The findings suggest that aggressive tax planning strategies spread within industries and carry policy implications.