The European Union (EU) has been debating for several years whether to change from the legal capital regime as regulated under the Second Company Law Directive to a solvency test regime as applied in the US, for example. Based on an analysis of direct compliance costs and capital maintenance...

We examine how anti-avoidance rules and a strategic tax auditor affect a firm’s investment and tax-avoidance incentives in a game-theoretic model. Our model investigates a firm that decides on a lump-sum investment and tax avoidance. In contrast to previous studies, our analysis incorporates a...