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This paper empirically examines how tax haven use affects classification shifting by public and private UK firms.

The authors conduct multivariate regression analyses of classification shifting on proxies of tax haven use for a broad sample of UK non-financial public and private firms from 2010 to 2018. An array of additional tests is conducted to ensure the robustness of the findings.

Firms using tax havens engage in more classification shifting relative to those that do not. The result is concentrated for public firms. While private firms’ classification shifting is generally pronounced, it appears unaffected by tax haven use. The findings suggest that the use of tax havens facilitates public firms’ classification shifting due to the lower institutional environment quality of these jurisdictions. In addition, classification shifting may be a less costly earnings management device for public firms using tax havens due to their political sensitivity.

The study highlights the need for regulatory intervention to constrain classification shifting, especially when firms use tax havens. It also calls for further scrutiny by auditors and financial analysts on the classification of income statement items.

While prior research focuses on accrual and real earnings management by public firms, this study investigates the consequences of using tax havens on classification shifting, a largely underexplored but heavily exploited earnings management strategy. Differences between public and private firms are also tested. Overall, this study offers an advanced understanding of how a firm’s institutional and political environments influence its financial reporting.

The role of common institutional ownership is becoming increasingly significant in China’s capital market. However, it remains unclear whether common institutional ownership plays a synergistic or collusive role in China’s capital market. Therefore, the study examines the impact of common institutional ownership on the cost of equity capital within the specific context of China.

This study uses a sample of Chinese listed firms over the period 2007–2021. It mainly employs ordinary least squares regression to examine the relationship between common ownership and the cost of equity.

Common institutional ownership has a beneficial, synergistic and monitoring role in reducing a firm’s cost of equity capital in the Chinese emerging market. Lowering business risks, reducing information risk and mitigating agency conflicts play a significant role in mediating the relationship between common institutional ownership and the cost of equity capital. The inhibitory effect of common institutional ownership on the cost of equity is more pronounced for non-SOEs, firms without government support and firms with lower investor attention. The study sheds a positive insight into the ongoing debate regarding the actual effect role of common ownership.

This study offers valuable insights into the ongoing debate regarding the practical implications of common institutional ownership, while also enriching the research on the factors that influence the cost of equity capital for firms. The conclusions hold significant practical implications for companies, investors and regulators.