We document that trades from tax havens provide significant information for future stock returns. Based on a unique proprietary dataset that includes all trades in Korea from 2006 to 2009 with buyer and seller identifiers and their country of origin, we find that hedged portfolio return based on net buys from tax havens amounts up to 25 basis points per day. Hedged returns are higher for
portfolios composed of small stocks or those that exhibit weak governance or low foreign ownership. Moreover, returns are higher when net buys are constructed from those accounts that only trade a single stock or multiple stocks from the same business group. We also find that these accounts engage in active buying immediately prior to the disclosure of positive earnings shocks or monopoly supply contract establishments. These findings suggest that one important motivation behind setting up paper companies in tax havens is not simply to hide existing income or wealth to avoid taxes, but to actively utilize insider information to increase their income or wealth that would otherwise have been illegal.
Keywords: Tax haven; Insider trading; Stock picking; Korea
JEL classification: G10; G14; G18
학회소식
[2015년 제 4차] Profitability of Trades from Tax Havens: Stock Pick
작성자 : 관리자
조회수 : 858
게시일 :
2016-01-08
