Transparency, Tax Pressure and Access to Finance

Transparency, Tax Pressure and Access to Finance

Andrew Ellul, Tullio Jappelli, Marco Pagano, Fausto Panunzi

Series number :

Serial Number: 

Date posted :

April 01 2012

Last revised :

November 12 2018
SSRN Share


  • Transparency • 
  • tax pressure • 
  • investment • 
  • Access to finance

In choosing transparency, firms must trade off the benefits from better access to finance against the cost of a greater tax burden. We study this trade-off in a model with distortionary taxes and endogenous rationing of external finance.

The evidence from two different data sets, one formed only by listed firms and another mainly by unlisted firms, bears out the model’s predictions: First, investment and access to finance are positively correlated with accounting transparency, especially in firms that depend more on external finance, and are negatively correlated with tax pressure. Second, transparency is negatively correlated with tax pressure, particularly in sectors where firms are less dependent on external finance, and is positively correlated with tax enforcement. Finally, financial development enhances the positive effect of transparency on investment, and encourages transparency by financially dependent firms.

Published in

Published in: 
Publication Title: 
Review of Finance
Volume 20, Issue 1, 1 March 2016, Pages 37–76


Research Member
Center for Studies in Economics and Finance (CSEF), University of Naples Federico II
Fellow, Research Member
Istituto di Economia Politica & IGIER, Università Bocconi