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Taxes, Theft, and Firm Performance



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    • Maxim Mironov is at the IE Business School, Spain. I am grateful to the members of my dissertation committee: Gary Becker, Atif Mian, Per Stromberg, and Luigi Zingales. This paper has benefited significantly from suggestions by an anonymous referee, an Associate Editor, and the Editor, Campbell Harvey. I also thank Marianne Bertrand, Salvador Carmona, Alexander Dyck, Juan Pedro Gomez, Sergey Guriev, Garen Markarian, Juan Santalo, Aleh Tsyvinski, Ekaterina Zhuravskaya, and seminar participants at the University of Chicago, Chicago Booth School of Business, New Economic School, University of Oxford, Said Business School, Bocconi University, IE Business School, INSEAD, and Universidad Torcuato Di Tella for helpful comments and suggestions. I am also grateful for financial support from the Spanish Ministry of Science and Innovation Research #ECO2010-17625.


This paper examines the interaction between income diversion and firm performance. Using unique Russian banking transaction data, I identify 42,483 spacemen, fly-by-night firms created specifically for income diversion. Next, I build a direct measure of income diversion for 45,429 companies and show that it is negatively related to firm performance. I identify the main reason for the observed effect as managerial diversion rather than tax evasion per se. I further show that stricter tax enforcement can improve firm performance: a one standard deviation increase in tax enforcement corresponds to an increase in the annual revenue growth rate of 2.6%.

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