ABSTRACT We study the economic consequences of anti‐loss trafficking rules, which disallow the use of loss carryforwards as a tax shield after a substantial ownership change. We use staggered changes to these rules in the EU27 Member States, Norway, and the United Kingdom from 1998 to 2019 and find that limiting the transfer of tax losses is related to the number of mergers and acquisitions (M&A) declining by 18%, driven by loss‐making targets. Turning to broader industry dynamics, we find decreases in survival rates of young companies after tighter regulations. Loosening of regulation is associated with increased firm survival. Tightening (loosening) anti‐loss trafficking rules is related to decreased (increased) industry productivity, especially in R&D‐intensive industries that are more prone to loss‐making. Finally, tighter anti‐loss trafficking rules are associated with lower deal synergies and risk‐taking. All effects concentrate in strict regimes.

ABSTRACT We investigate the effects of a qualitative tax disclosure mandate aimed at improving tax transparency and compliance by imposing reputational costs for firms. We use, as an exogenous shock, the 2016 UK reform that required large businesses to disclose their tax strategy. We find that treated firms—those that must publish a tax strategy report—also significantly increase the volume of tax strategy disclosure in their annual reports, but this disclosure contains more boilerplate. The standalone tax strategy reports contain narratives similar to those in the annual reports, are sticky, and their quality is correlated with those of disclosures on gender and human rights. Turning to real behavioral changes, we document no significant effect on tax planning across several proxies and firm characteristics. While we find that the mandate increased media attention on treated firms, our results suggest that this enforcement channel might not work in the context of qualitative disclosure, which may be hard to verify for outside stakeholders. Even in subsamples of firms for which we would expect higher reputational costs, we document similar responses. Taken together, our findings indicate that mandating qualitative tax disclosure has incentivized firms to portray themselves as good tax citizens without changing their practices.