Are article 9 funds superior? A comprehensive empirical analysis of the SFDR regulation on its efficacy, flows and performance

This master's dissertation examines the impact of the Sustainable Finance Disclosure Regulation (SFDR) on mutual equity funds domiciled in the Eurozone, specifically those governed by Article 9, and the ensuing behavioural repercussions on investors. This academic endeavour contributes to the growing empirical evidence positing the SFDR regulation as an effective bulwark against greenwashing. This is substantiated through the analysis of cross-sectional data procured from two independent ESG data providers, Refinitiv and MSCI, demonstrating that funds governed by Article 9 consistently deliver superior ESG metrics. Further, this dissertation probes the propensity of investors to allocate a greater quantum of capital towards Article 9 funds and ventures into a detailed analysis of the inherent characteristics of these investors. Utilising a panel data dataset and deploying a difference-in-differences model revealed that investors demonstrate a preference for Article 9 funds preceding the final implementation date of 10th March 2021. Additionally, these investors exhibit signs of higher resilience. Lastly, this research assesses performance disparities by deploying the Fama and French 3-Factor Model. The analysis suggests that Article 9 funds are characterised by heightened factor exposure to growth investments. Nevertheless, during the observation period spanning 2018 to 2022, SFDR 9 funds do not exhibit a positive alpha. However, when assessed through a difference-in-differences lens, these funds demonstrate a significantly higher alpha than their counterparts.Esta dissertação analisa o impacto do Regulamento relativo à divulgação de informações sobre finanças sustentáveis (Sustainable Finance Disclosure Regulation - SFDR) nos fundos de investimento em ações da zona euro, especificamente nos fundos regidos pelo Artigo 9. Esta tese contribui para as crescentes provas empíricas que apontam o regulamento SFDR como um baluarte eficaz contra greenwashing. Isto é comprovado através da análise de dados transversais obtidos de dois fornecedores independentes de dados ESG, Refinitiv e MSCI, demonstrando que os fundos regidos pelo Artigo 9 consistentemente alcançam métricas ESG superiores. Além disso, esta dissertação investiga a propensão dos investidores para afetarem um maior volume de capital aos fundos do Artigo 9 e analisa as características inerentes a estes investidores. A utilização de um conjunto de dados de painel e a aplicação de um modelo de diferenças em diferenças revelaram que os investidores demonstram uma preferência pelos fundos do Artigo 9 antes da data de implementação final de 10/03/2021. Além disso, estes investidores apresentam sinais de maior resiliência. Por último, este estudo avalia as disparidades de desempenho através da aplicação do modelo de 3-fatores de Fama e French. A análise sugere que os fundos do Artigo 9 se caracterizam por uma maior exposição a fatores de investimento em crescimento. Ainda assim, durante o período de observação de 2018-2022, os fundos SFDR 9 não apresentam um alfa positivo. No entanto, quando avaliados através de uma lente de diferença nas diferenças, estes fundos demonstram um alfa significativamente mais elevado do que os seus homólogos

Impact of tax rate cut cum base broadening reforms on heterogeneous firms: Learning from the German tax reform 2008

The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to € 9.8 billion and the trade tax gains fiscally in importance. --tax reform,microsimulation,tax policy evaluation

Impact of tax rate cut cum base broadening reforms on heterogeneous firms: Learning from the German tax reform 2008

The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to 9.8 billion and the trade tax gains fiscally in importance. --Tax reform,microsimulation,tax policy evaluation

ZEW Corporate Taxation Microsimulation Model (ZEW TaxCoMM)

Current political discussions in Germany and other European countries illustrate the importance accorded to revenue and distribution effects of tax reforms. Whereas widely recognized concepts of effective tax measures can provide important insights into the incentives of taxation they do not allow robust revenue estimations or distribution analyses. Hence there is need to supplement existing quantitative tax models by approaches apt for these issues of policy analysis. Against this background, this paper puts forward a corporate microsimulation model allowing an ex-ante evaluation of tax reforms with regard to distributional consequences and revenue effects. Central feature of the model is the processing of financial statements included in the DAFNE data base of the Bureau van Dijk. The firm-level data is supplemented by survey data on tax accounting practices. The focus of the paper is on the documentation of the model set-up. Its application will be addressed in future publications. --Microsimulation Model,Corporate Taxation,Policy Analysis,Firm-Level Data

ZEW Corporate Taxation Microsimulation Model (ZEW TaxCoMM)

Current political discussions in Germany and other European countries illustrate the importance accorded to revenue and distribution effects of tax reforms. Whereas widely recognized concepts of effective tax measures can provide important insights into the incentives of taxation they do not allow robust revenue estimations or distribution analyses. Hence there is need to supplement existing quantitative tax models by approaches apt for these issues of policy analysis. Against this background, this paper puts forward a corporate microsimulation model allowing an ex-ante evaluation of tax reforms with regard to distributional consequences and revenue effects. Central feature of the model is the processing of financial statements included in the DAFNE data base of the Bureau van Dijk. The firm-level data is supplemented by survey data on tax accounting practices. The focus of the paper is on the documentation of the model set-up. Its application will be addressed in future publications. --Microsimulation Model,Corporate Taxation,Policy Analysis,Firm-Level Data

Tax planning of R&D intensive multinationals

The allocation of management and control in the business decision process finds expression in the coordination intensity between agents in the firm. We develop and test a theory, based on the organizational design literature, for the intensity in which the tax department strives to coordinate with managers from other business units in order to intervene in investment decisions. Our theoret- ical considerations predict that R&D intensity is an important determinant of the tax department's role. Using data from a confidential survey taken in 2012 of top financial and tax managers of very large multinational companies, repre- senting 8% of business R&D spending in the OECD, we indeed find supporting evidence that in R&D intensive multinational firms the tax department operates more as a controller than as a manager. In particular, tax departments of R&D intensive firms make less tax planning effort, are less ambitious to minimize the tax burden of the firm, are later involved in the decision-making process of a new investment project, but are more likely to have a veto right in the decision on a new investment project as compared to less R&D intensive firms. Conditional on R&D intensity, however, the level of intangible assets in the firm is associ- ated with more tax planning efforts and ambitions. Our results are statistically significant and robust towards several sensitivity checks

Besteuerungsprinzipien und effektive Unternehmenssteuerbelastungen in der Europäischen Union

Dieser Beitrag untersucht umfassend die Unternehmensbesteuerung in der Europäischen Union im Zeitraum von 1998 bis 2007. Das innereuropäische Steuergefälle wird unter Rückgriff auf zwei zentrale Maßgrößen - die Kapitalkosten und die effektive Durchschnittssteuerbelastung - abgebildet. Die Berechnungen auf Grundlage der Methodik nach Devereux und Griffith erlauben dabei die Messung der Steuerbelastung auf rein inländische als auch auf grenzüberschreitende (Direkt-)Investitionen. Die eingehende Analyse der auf diese Weise detailliert quantifizierten Besteuerungsregime zeigt unter anderem, dass in der EU das Prinzip der Kapitalimportneutralität gegenüber einer Verwirklichung von Kapitalexportneutralität klar dominiert. Die nicht realisierte Harmonisierung der Unternehmensbesteuerung impliziert Produktionsineffizienzen aufgrund steuerlich verzerrter Investitions- und Standortentscheidungen sowie Wettbewerbsverzerrungen

Assessing the impact of introducing an ACE regime : a behavioural corporate microsimulation analysis for Germany

In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and +7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level

Besteuerungsprinzipien und effektive Unternehmenssteuerbelastungen in der Europäischen Union

Dieser Beitrag untersucht umfassend die Unternehmensbesteuerung in der Europäischen Union im Zeitraum von 1998 bis 2007. Das innereuropäische Steuergefälle wird unter Rückgriff auf zwei zentrale Maßgrößen - die Kapitalkosten und die effektive Durchschnittssteuerbelastung - abgebildet. Die Berechnungen auf Grundlage der Methodik nach Devereux und Griffith erlauben dabei die Messung der Steuerbelastung auf rein inländische als auch auf grenzüberschreitende (Direkt-)Investitionen. Die eingehende Analyse der auf diese Weise detailliert quantifizierten Besteuerungsregime zeigt unter anderem, dass in der EU das Prinzip der Kapitalimportneutralität gegenüber einer Verwirklichung von Kapitalexportneutralität klar dominiert. Die nicht realisierte Harmonisierung der Unternehmensbesteuerung impliziert Produktionsineffizienzen aufgrund steuerlich verzerrter Investitions- und Standortentscheidungen sowie Wettbewerbsverzerrungen. --Effektive Steuerbelastung,Europäische Union,Unternehmensbesteuerung