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Open Access Publications from the University of California

How does quasi-indexer ownership affect corporate tax planning?

  • Author(s): Chen, S
  • Huang, Y
  • Li, N
  • Shevlin, T
  • et al.

© 2018 Elsevier B.V. We study whether, and more importantly, through what mechanisms, quasi-indexers affect portfolio firms’ tax planning by employing the discontinuity in quasi-indexer ownership around the Russell 1000/2000 index cutoff. Using a regression discontinuity design, we find that higher quasi-indexer ownership leads to greater tax saving. With respect to the mechanisms, we find that the greater tax saving is a result of a focus on improved overall firm performance, not a specific focus on improved tax planning. We further find that the documented tax saving effect is partially due to quasi-indexers’ influences on executive equity incentives, corporate governance, and information environment.

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