Expropriations, Property Confiscations and New Offshore Entities: Evidence from the Panama Papers

TL;DR

This paper uses Panama Papers data to show that media reports on property confiscations lead to increased offshore entity incorporations by agents from the same country, especially in well-functioning governments fighting organized crime.

Contribution

It provides novel evidence linking media reporting on confiscations to offshore entity formation, highlighting government effectiveness in anti-crime efforts.

Findings

Media reports on confiscations increase offshore incorporations.

Effect is stronger in countries with effective governments.

Offshore entities are linked to anti-crime measures.

Abstract

Using the Panama Papers, we show that the beginning of media reporting on expropriations and property confiscations in a country increases the probability that offshore entities are incorporated by agents from the same country in the same month. This result is robust to the use of country-year fixed effects and the exclusion of tax havens. Further analysis shows that the effect is driven by countries with non-corrupt and effective governments, which supports the notion that offshore entities are incorporated when reasonably well-intended and well-functioning governments become more serious about fighting organized crime by confiscating proceeds of crime.