The scandal Panama Papers It cost 230 billion dollars of market capitalization to companies that could be involved. This is stated by the study “The Value of Offshore Secrets – Evidence from the Panama Papers”, prepared by Hannes Wagner (Bocconi Department of Finance), James O' Donovan (INSEAD) and Stefan Zeume (University of Michigan).
Although the entire database of offshore entity owners created by Mossack Fonseca will be disclosed only tonight, that's a higher total in losses and fines tied to the scandals and leaks at Home Depot, Target, Volkswagen and Enron combined.
At the heart of the study is the performance of the shares of companies that have branches in Panama, the British Virgin Islands, the Bahamas and the Seychelles (the territories that represent 90% of the tax havens used by Mossack Fonseca), comparing it with that of the rest of the market: this is a sample of 26.655 listed companies in 73 countries, with a total of 543.151 branches in 213 territories.
Approximately 1.100 of these companies (4,1% of the sample) have at least one branch in one of the four tax havens and, around the leak, suffered a drop in share prices of more than 0,5-0,6 % that of companies from the same country and the same sector that do not have this kind of exposure. The sum of these losses amounts to 230 billion dollars.
“It may very well be that companies have branches in Panama or other tax havens for completely legitimate reasons,” Wagner says, “but if you are based in a tax haven, cheating becomes easier, thus raising the suspicions of the market.”
According to Wagner, “from now on it will be more difficult to use the offshore entity in ways that businesses deem useful – whether legal or illegal. In other words: the leak has significantly reduced the expected benefits of offshore structures”. In addition to companies based in tax havens, those affected were the companies of those countries that have seen important politicians involved in the scandal, such as theIceland, given that the Icelandic prime minister allegedly used offshore centers to mask financial transactions.
