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The Effect of Mandatory Extraction Payment Disclosures on Corporate Payment and Investment Policies Abroad
Author(s) -
RAUTER THOMAS
Publication year - 2020
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12332
Subject(s) - business , payment , revenue , multinational corporation , productivity , competitor analysis , finance , monetary economics , economics , marketing , economic growth
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.