Obfuscating Ownership By John S. Earle and Scott Gehlbach and Anton Shirikov and Solomiya Shpak∗ We examine the decision of wealthy business owners to protect their holdings from expropriation and arbitrary taxation through proxies, shell companies, and offshore firms. Our theoretical framework emphasizes the role of political connections in decisions to obfuscate. Linking information from investiga- tive journalists on Ukrainian oligarchs with firm-level administrative data on formal ownership ties, we observe obfuscation among more than two-thirds of oligarch-controlled firms, but such behavior is much less common for con- nected oligarchs. Further exploiting the abrupt shock to political connections that accompanied the Orange Revolution, we find a sharp rise in obfuscation among previously connected oligarchs. JEL: D23, G32, P26 ∗ Earle: George Mason University, Schar School of Policy and Government, 3351 Fairfax Drive, Arling- ton, VA 22201,
[email protected]. Gehlbach: University of Chicago, Department of Political Science and Harris School of Public Policy, 5828 South University Avenue, Chicago, IL 60637,
[email protected]. Shirikov: University of Wisconsin{Madison, Department of Political Science, 110 North Hall, 1050 Bascom Mall, Madison, WI 53706,
[email protected]. Shpak: George Mason University, Schar School of Policy and Government, 3351 Fairfax Drive, Arlington, VA 22201,
[email protected]. The National Science Foundation provided primary support for this project through Grant No. 1559197 on \Political Connections and Firm Behavior." Earle and Shpak acknowledge additional support from a GMU Provost Grant for Multidisci- plinary Research, and Gehlbach and Shirikov acknowledge additional support from the Office of the Provost, the Office of the Vice Chancellor for Research and Graduate Education, and the Center for Russia, East Europe, and Central Asia at UW Madison.