Hannes Wagner Wins the Michael J. Brennan Award, Runner Up

Each year, the editors of The Review of Financial Studies (RFS) select two winners to receive the Michael J. Brennan Award for the Best Paper Published in the Review. This year's awards were announced at the Society for Financial Studies' (SFS) 2020 Cavalcade North America on May 25-28. All papers published in the prior year's issues of RFS are eligible to win. Bocconi professor Hannes Wagner's paper "The Value of Offshore Secrets: Evidence from the Panama Papers", joint with James O'Donovan and Stefan Zeume, won the Runner Up Award.

RFS Editor Holger Mueller said during the award ceremony that "the paper needs no introduction". In their award-winning paper, Professor Wagner and his colleagues in Asia and the US analyzed how publicly trade firms around the world use secret offshore vehicles in tax havens. The corporate use of a tax haven entails corporate insiders creating an offshore vehicle, typically with the help of an offshore service provider. The paper focuses on those cases where the offshore vehicle is a secrecy device that serves to hide activities and information from outsiders. The authors attempt to answer how prevalent the corporate use of secret offshore vehicles is, why firms use them, and how their use affects shareholder value.

The paper identified a large negative effect on the market value of firms that were revealed to be secret users of offshore vehicles. Offshore sheltering enables value enhancing activities such as bribery and tax evasion. The Panama Papers leak destroyed some of that value. Following the leak, firms with Panama Papers exposure reduced their tax avoidance significantly and experienced a reduction in their activities in perceptively corrupt regions. Sales from perceptively corrupt regions, for instance, decline by 5% to 6% for exposed firms vis-à-vis unexposed firms.