We are pleased that our fourth VARS hosted an experimental paper by Victor van Pelt (WHU), co-authored with Bart Dierynck (Tilburg University), Martin Jacob (WHU), Maximilian Mueller (ESMT Berlin) and Christian Peters (Tilburg University).
Motivated by recent developments in policies mandating the disclosure of corporate taxed, the paper investigates how these policies affect retail investors' perceptions on whether firms are paying their “fair share” of taxes. Framed in attribute substitution theory, the paper posits that public disclosure of corporate taxes causes retail investors to over-rely on the amount of corporate taxes that is publicly disclosed while losing sight of the underlying tax avoidance methods. Victor got the audience very engaged early in his presentation by illustrating his hypothesis through a “poll” which tricked (most of) us.
The first round of Q&A mainly focused on what a “fair share” constitutes and whether the anchor on which investors rely upon to determine “fair share” would be affected because of retail investors misunderstanding the tax disclosure.
The presentation then turned into explaining better attribute substitution theory, the role of public disclosure, the features of the experimental design and the key findings. Overall, a great paper that documents a potential unintended consequence of mandatory disclosure policies on corporate taxes.
The slides and video of the VARS are available in our repository.