Research

Abstract

I examine whether tax haven firms respond to the Financial Action Task Force’s (FATF) money laundering sanctions by disclosing information on their beneficial owners. I hypothesize that the sanctions are enforced through networks of intermediaries—banks and corporate law firms—that serve firms across tax havens. Exploiting the staggering of the sanction decisions, I find that tax haven firms respond to the sanctions by verifying their beneficial owners and by disclosing more specific information about their funding source. The impact on verifications is more pronounced in tax havens that have less dealings with international banks. The threat of the sanction spills over through networks of corporate law firms prompting an increase in verifications in non-sanctioned tax havens that are highly connected to the sanctioned tax haven. Taken together, the findings suggest that money laundering sanctions enhance ownership transparency among tax haven firms, but their efficacy depends on the bank and law firm networks within havens.

Abstract

Rising geopolitical tensions are reshaping cross-border investment and trade regulations between the countries. Allegations of politically motivated foreign farmland purchases near U.S. military bases have taken center stage in this legislative debate. The ongoing debate has not clearly distinguished these alleged political motives from economic motives. We empirically test for this political benefit hypothesis. Specifically, we study how foreign land purchase location choices and prices are associated with changes in federal and state laws that determine how these purchases are monitored, while controlling for a host of economic and demographic characteristics of the land. First, our findings demonstrate that militarily competing countries tend to purchase farmland closer to US military bases. This effect is eliminated after increased regulatory scrutiny on foreign investment through the adoption of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Second, we show that land plots closer to military bases have a higher sales value, this effect is exacerbated after FIRRMA, and this effect is especially apparent for purchases by militarily competing countries. Finally, we discover that this military base proximity premium is eliminated in states requiring foreign land purchase disclosure, and this effect is especially apparent after FIRRMA. Our results, taken together, support the political motive hypothesis for these foreign land acquisitions but also suggest that these motives are sensitive to existing foreign investment disclosure and monitoring laws. Collectively, our findings provide novel descriptive evidence that can help inform how geopolitical forces shape foreign investment regulation. 

*Presented: MIT Asia Accounting Conference (2023, Singapore)

Abstract

Tax laws and disclosures serve to hold private foundations accountable to their charitable mandate, but empirical evidence on their impact is limited. I find that foundations subject to non-charitable activity disclosure requirements increase their legal and accounting expenses by 8%, compared to non-mandated counterparts, to safeguard their tax-exempt status. Also, due to reclassification of tax-exempt assets, such foundations elevate their donations by 8% relative to those exempt from the disclosure mandate. These foundations are closer to their minimum donation requirement so they have stronger incentives to avoid triggering penalties for failing to donate sufficiently. Collectively, this evidence indicates that public disclosure of non-charitable activities can improve foundation accountability and support their charitable objectives.

*Presented: University of Chicago Booth Accounting Workshop (2022, 3rd year paper)

Work in process: data collection and analysis

Work in process: data analysis

Work in process: data collection and analysis