We assess the investor reaction to a potential introduction of public country-by-country reporting (CbCR) into the European Capital Requirements Directive IV. Estimating cumulative abnormal returns with the help of a multivariate regression model, we find weak significant evidence around our event date (February 20th, 2013) that investors perceive the introduction of CbCR as beneficial. In additional tests, we assess investor perceptions relative to different control groups (domestic institutions and non-EU institutions) and in the cross-section (splitting across size, systemically relevant, pre-event level of GAAP ETR and pre-event level of geographic disclosure). The only significant outcome is a negative reaction for large international EU institutions.
Flagmeier, Vanessa and Gawehn, Vanessa (March 2020)