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)

Abstract

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
• Refereed: Yes
• 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: 0963-8180
• 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