Corporate governance and profit shifting: the role of the audit committee

Delis, F., Delis, M. D., Karavitis, P. I. and Klassen, K. J. (2021) Corporate governance and profit shifting: the role of the audit committee. European Accounting Review, (doi: 10.1080/09638180.2021.2003216) (Early Online Publication)

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We examine tax-motivated profit shifting as the outcome of corporate governance characteristics in multinational enterprises (MNEs). We propose a novel subsidiary-year measure of profit shifting, estimated from the responses of subsidiary profits to exogenous parent earnings shocks. Subsequently, we hypothesize that audit committee size and experience, as well as CEO duality are key factors affecting profit shifting. Our baseline results show that increasing audit committee size by one standard deviation increases profit shifting by an economically significant 7.8%. We also find that this positive effect reverses for MNEs with higher numbers of audit committee members who have audit expertise and for MNEs without CEO duality.

Item Type:Articles
Status:Early Online Publication
Glasgow Author(s) Enlighten ID:Karavitis, Dr Panagiotis
Authors: Delis, F., Delis, M. D., Karavitis, P. I., and Klassen, K. J.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:European Accounting Review
Publisher:Taylor and Francis
ISSN (Online):1468-4497
Published Online:01 December 2021
Copyright Holders:Copyright © 2021 European Accounting Association
First Published:First published in European Accounting Review 2021
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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