Research Summary
Research Summary
The Corporate Governance Role of Taxes
Description
Dyck introduces evidence that private benefits of control are higher in countries with poor tax enforcement and in ongoing work explores further this correlation using both theory and empirical work from the United States and Russia. This work illustrates that the debate on corporate governance has ignored a fundamental point: the largest minority shareholder of all is the Government. The way this shareholder exercises its rights has a great impact on the performance of the corporate governance system: once profits are declared and become taxable, they are difficult to abscond. On the other hand, the incentives to hide profits from minority shareholders is higher when declared profits are taxed more heavily.