Information Asymmetry in Non-Us Stocks : The Compounding and Mitigating Effects of Tax Havens and Corruption

We investigate the role of a country's position as a tax haven and its level of corruption in information asymmetry for non-US stocks listed on the New York Stock Exchange. Our results indicate that non-US stocks from countries with more pronounced attributes of tax havens and more corruption have a higher probability of information-based trading and lower market liquidity. Deeper analysis into the separate attributes of tax havens lends insight into significant drivers of these effects, including weak anti-avoidance measures and legal complexities, with lesser effects from double tax treaties. Finally, we observe that country corruption’s influence on information asymmetry depends on that country’s position as a tax haven, with the highest levels of information asymmetry occurring in jurisdictions possessing both strong haven attributes and corruption. Our findings suggest that diminishing the influence of global tax havens, especially in regions of high corruption, can enhance market liquidity, ultimately benefiting investors and contributing to the overall stability and efficiency of financial markets