Public Disclosure of Foreign Subsidiaries and International Tax Avoidance

Our study analyzes the influence of public disclosure of group structures in Exhibit 21 on the tax aggressiveness of U.S. multinational firms. Several U.S. multinational enterprises have removed a substantial number of subsidiaries from their Exhibit 21 since 2008. Our analysis suggests that firms that decided to substantially reduce the number of foreign subsidiaries disclosed in their Exhibit 21 avoid significantly more taxes compared to firms that did not change disclosure. Our results suggest that publicly disclosed country-by-country information could influence MNEs’ tax avoidance behavior.