Illicit financial flows, including aid diversion, remain a critical challenge for developing countries, draining vital resources and impeding sustainable development. With a considerable number of aid-receiving nations facing high corruption levels, concerns arise about the aid reaching its intended destination. In this paper, we study the impact of enhanced financial transparency on aid diversion induced by global efforts advocating for greater transparency in the financial system of tax havens since 2009. We examine the relationship between changes in foreign bank deposits linked to aid disbursements in aid-dependent countries. Our results indicate that the global push to end bank secrecy positively influenced the diminishing effect of aid capture, particularly after 2008, coinciding with the initial release of customer information from tax havens. The findings have significant implications for the allocation of foreign aid, especially in aid-dependent countries involved in offshore leaks and with high degree of corruption.

We analyze the impact of public disclosure of politicians' outside income on their income, following the implementation of disclosure regulations for German federal MPs. We use administrative tax return data and a difference-in-differences design with unaffected state MPs serving as the control group. We show that MPs increased their outside income once this information became publicly available. Using a proxy for party membership, we find evidence that right-wing MPs drive the effect. To explain this finding, we conducted a survey experiment among German voters, which revealed that the interpretation of moderate outside income varies along party lines. Specifically, right-wing voters perceive outside income as a sign of competence, whereas left-wing voters believe that such politicians are less likely to represent their constituents effectively.

Non-profit entities that meet certain earnings and asset thresholds are required to publicly disclose the compensation of certain employees whose taxable earnings exceed $100,000. We use empirical bunching techniques and administrative data to estimate the behavioral response of taxpayers to this transparency threshold. We bound the willingness to pay to avoid salary transparency between $173 and $3,695 of pre-tax earnings. These results suggest that taxpayers and firms are likely to value salary confidentiality.

This paper studies the effect of leaks of confidential offshore documents on the value of the implicated firms. Using the International Consortium of Investigative Journalists’ Offshore Leak Database, I identify 206 publicly traded firms connected to the implicated offshore firms. I use propensity score matching to identify similar non-implicated companies and assess the leaks’ impact on the stock prices of both groups using an event study methodology. I find that implicated firms have 1.5% lower cumulative abnormal returns during the event window compared to similar non-implicated firms. I estimate that the implicated firms lost an average of USD 105 million in stock market value following the leaks.