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Corruption, Tax Abuse, and Financial Secrecy
Palanský, Miroslav ; Janský, Petr (advisor) ; Riedel, Nadine (referee) ; Zucman, Gabriel (referee) ; Johannesen, Niels (referee)
Corruption, Tax Abuse, and Financial Secrecy PhD Dissertation, Miroslav Palanský, IES CUNI, 2020 Abstract This dissertation is composed of three papers that focus on different aspects of the relationship between the public sector and individuals who do not comply with the norms and regulations set by the government. I classify the ways in which individuals do so into two categories - corruption and tax abuse. Corruption, defined as the abuse of entrusted power for private gain, results in individuals obtaining more benefits from the public sector than is intended. Tax abuse, on the other hand, is defined as contributing less to the public sector than is intended. The last chapter of the dissertation focuses on financial secrecy, which I argue is the key facilitator of the two channels. In Chapter 2, I show that companies that donate money to Czech political parties subsequently report abnormally high profits, pointing to preferential treatment that these firms enjoy as a result of their political connections: I conservatively estimate that the connected firms outperform their non-connected but otherwise similar competitors by 8 to 12% following the establishment of the connection, which is a higher effect than found previously for more developed economies. Importantly, however, I find that the effect...
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Anonymous Companies and Public Procurement: Evidence from the Czech Republic
Jakab, Miroslav ; Palanský, Miroslav (advisor) ; Janský, Petr (referee)
Anonymous Companies and Public Procurement: Evidence from the Czech Republic Abstract This thesis follows up on previous research concerning inefficiencies linked to tenders awarded to anonymous companies. After anonymous shares were abolished in 2014, the question is whether similar inefficiencies can be detected in the case of companies that ceased to be anonymous. A balanced sample of formerly anonymous companies and their comparable peers was constructed via a matching algorithm. A Welch unequal variance t-test was then used to check whether a disproportionate drop in selected performance indicators and in the share of formerly anonymous companies on total volume of public procurement can be detected. A linear regression model was further applied to inquire about the effect of anonymity and former anonymity on tender-specific savings. The results show that anonymity significantly contributes to lower tender savings, but no similar negative effect can be found in case of formerly anonymous companies. Profitability of the formerly anonymous companies also decreased, but no long- term drop in tender volume was found, indicating that a large portion of the inefficiencies can be traced back to well-established businesses rather than special purpose shells. This thesis thus extends the present research in the...
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Political connections, public procurement and small-scale expenditures
Vitvar, Tomáš ; Palanský, Miroslav (advisor) ; Smutná, Šarlota (referee)
In this thesis, I introduce a new approach of estimating financial flows from government organisations towards its suppliers of goods and services. It is based on accounting data collected by a Ministry of Finance of the Czech Republic and unlike other available data sources offers an opportunity to study all transactions, including small-scale expenditures. Using this approach, I study the effect of an outcome of 2018 elections on the structure of municipality's suppliers. Interestingly, I find that one year after the elections there is no significant difference between municipalities with different election results. This suggests that there is either no rent-seeking activity at all, or that it takes a different form than a selection of suppliers. Also, while conducting this analysis, I quantify a link between a winning party and an affiliation of a mayor and show how it increases in municipalities where there is a dominance of one political party. Keywords political connections, public procurement, corruption, politics, government expenditures, municipality, local government, election JEL Classification D72, H72, K40
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Political connections and ruling in public procurement disputes: Are the decisions of the Czech Office for the Protection of Competition politically biased?
Viktorinová, Marie ; Palanský, Miroslav (advisor) ; Janský, Petr (referee)
Marie Viktorinová Abstract The data about financial support of firms and individuals to politicians provide an incentive for research as the connections between businesses and politics raises the problem of conflict of interest. Using data about results of disputes in public procurement tenders from 2004 to 2018, data about donations to political parties and data about parties in power of municipalities, regions and ministries between the years 2006 and 2018, this thesis investigates the effect of political connections on the results of disputes in public procurement. The analyze focuses on hypotheses about significant effect of having complainant or chosen contestant connected to party in power of government, municipality, region or ministry on the result of dispute being serious misconduct against fair competition, where distinct subsets of disputes with respective contracting authority are considered. Using logistic and probit regressions, the results of this thesis point out a significant positive relationship between misconduct found and chosen contestant connected to any party. Finally, the thesis lays down its constrictions and few suggestions for future research.
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Earnings Management under Financial Distress Conditions, the Effect of Tax Considerations
Britskiy, Andrey ; Novák, Jiří (advisor) ; Palanský, Miroslav (referee)
This master thesis attempts to contribute to the existing earnings management literature by examining whether tax avoidance incentives affect opportunistic accounting choices in distress conditions. To address this issue, it investigates 2668 companies in the quarters around breach of debt covenant spanning from 1996 to 2006. This allows to analyze two distress scenarios: first, whether the companies having the opportunity to minimize tax expenses and thus improve their financial stability, would deliberately switch from engaging in aggressive upwards real earnings management to tax considerations to mitigate the potential consequences of technical default; second, whether the companies facing increased lender's scrutiny after subsequent violation are compelled to switch by the creditor. The results indicate that tax considerations do not deter misreporting in the quarters around debt covenant violation. This thesis further provides evidence against the debt covenant hypothesis: the companies in the analyzed sample engaged in negative revenue manipulation in the quarters of new breach of debt covenant and in the quarters in which the firms remained in violation. In additional analysis, it was found that the above relationship is more prominent for the companies exhibiting poor financial performance.
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The Impact of International Sanctions on The Economy of Iran
Kraváček, Tomáš ; Baxa, Jaromír (advisor) ; Palanský, Miroslav (referee)
The pursue of Iran's regional ambitions since the very existence of the Islamic republic has commonly collided with the interests of other regional players such as Saudi Arabia and Israel supported by the U.S. Consequently, Iran has been often a target of various U.S. sanctions. Later, after the continuing Iranian reluctance to abide by the international rules concerning its nuclear programme, the EU joined the U.S. in sanctioning Iran. In 2012, the oil embargo was imposed by the former which dramatically reduced the value of Iranian exports. In this thesis, we apply the synthetic control method to estimate the effect of international sanctions on the economy of Iran. We estimate the possible development of Iranian GDP per capita during the 2010-2015 period had it not been for the international sanctions. Our results show a steady growth of the GDP per capita in the absence of the sanctions. In 2015, the last year of the sanctions, the difference between our estimated GDP per capita and the actual one is 1,911 U.S. dollars. Keywords synthetic control method, nuclear programme, GDP per capita, Iran, sanctions, trade, oil
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The Value of Political Connections: Evidence from the Czech Republic
Palanský, Miroslav ; Janský, Petr (advisor) ; Gregor, Martin (referee)
The Value of Political Connections: Evidence from the Czech Republic Miroslav Palanský Abstract This thesis estimates the value of political connections in the Czech Republic and it is divided into two parts. The first one explores the recently extended, most advanced publicly available data set on political party financing in the Czech Republic, covering the time period 1995-2015. We analyze basic patterns in party funding and their development over time. We focus primarily on private funding from both legal and natural persons. The data show that there exists substantial heterogeneity in the volume of private funding across parties and over time, but contributions from the government budget remain the most important source of income for all larger parties. We analyze the available data on donations and discuss several issues regarding the notion that donors may view contributions as investment, yielding possible profits in the future. In the second part, we use the data set of corporate donations to construct a proxy variable for political connections and to estimate the effect of being connected to a political party on the financial performance of such firms. We find that the connected firms perform significantly better than the non- connected ones in the years following the establishment of the...
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Tax havens' financial secrecy and its development
Machil, Matej ; Palanský, Miroslav (advisor) ; Janský, Petr (referee)
Tax havens and global financial secrecy have become a major issue in the modern world. In order to effectively increase transparency across the world, it is important to know how the secrecy is developing over time. Financial Secrecy Index ranks jurisdictions according to their secrecy level and their share of the global market of the financial services provided to non-residents. Accurate information on development of secrecy plays an important role for policy makers who collaborate on the expansion of worldwide transparency. The main objective of the thesis is to reduce the influence of change of methodological approach applied in the calculation of the ranking by implementing this methodology to the previous edition of the Financial Secrecy Index. As a result, comparison of secrecy in involved jurisdictions has been enabled over last couple of years. The presented work seeks to find out whether the movements across the ranking were caused by the change of secrecy or by the change in methodology. Moreover, this thesis confirms that overall secrecy level is decreasing over time mainly as a consequence of the improvement in international standard and cooperation. JEL Classification F36, F63, F65, G28, H26 Keywords Financial Secrecy Index, tax havens, secrecy jurisdictions, financial secrecy,...
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Estimates of the role of non-tariff measures in trade between CZE/EU and Japan
Srna, Jan ; Semerák, Vilém (advisor) ; Palanský, Miroslav (referee)
Japan and the European Union negotiated and ratified an agreement about free-trade area that came into effect in January 2019. There haven't been enough data for Japan and the Czech Republic to show the actual impact yet. Gravity model is a useful tool for international trade that can be used to estimate the effect. Various types of methods are used for estimation. The main ones used here in this paper are Random effects and Poisson Pseudo Maximum Likelihood (PPML) estimator. According to PPML model, the impact of the treaty is expected to be 57.3% increase of imports. The model shows positive trade potential for Japan and the Czech Republic. Especially for Japan there is a large gap between model prediction and actual values which means a small trade creation is expected. However, the most of the increasement of bilateral trade should be originated from trade diversion.
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