Tax Aggressiveness of Brazilian B3-Listed Companies and ADR Issuers: Comparison of SOX, SEC and B3 Regulations

This study investigates whether Brazilian companies listed on the B3 exchange and issuing American Depositary Receipts (ADRs) exhibit less tax aggressiveness regarding profit taxation. When operating in the US market, these companies are subject to the Sarbanes-Oxley Act (SOX) and the Securities and Exchange Commission (SEC) regulations, designed to protect investors by ensuring transparency and reliability in the information provided. Effective Tax Rate (ETR), Book-Tax Differences (BTD), and Cash Effective Tax Rate (CashETR) were employed as proxies to measure tax aggressiveness. The sample comprises companies listed on B3 from 2011 to 2019. To mitigate selection bias, Nearest Neighbors Matching (NNM) and Propensity Score Matching (PSM) algorithms were applied to create subsamples with similar characteristics, distinguished by the decision to issue ADRs. The research indicates that a company subject to SOX and SEC regulations is not more tax aggressive than one solely subject to B3 regulation. These findings suggest that regulatory measures in the Brazilian market (B3) may be as effective as those in the United States in preventing aggressive tax practices.