Multinationals, Minority Ownership and Tax-Efficient Financing Structures
39 Pages Posted: 5 May 2010
There are 2 versions of this paper
Multinationals, Minority Ownership and Tax-Efficient Financing Structures
Multinationals, Minority Ownership and Tax-Efficient Financing Structures
Date Written: April 2010
Abstract
This paper presents a theory model that simultaneously accounts for the financing decisions and ownership structure in affiliates of multinational firms. We find that affiliates of multinationals have higher internal and overall debt ratios and lower rental rates of physical capital than comparable domestic firms. We also show that affiliates with minority owners have less debt than wholly owned affiliates and a less tax-efficient financing structure. The latter is due to an externality whereby minority ownership dampens the incentive to avoid taxes through the use of internal debt.
Keywords: multinationals, tax-efficient financing structures, minority ownership
JEL Classification: H25, F23
Suggested Citation: Suggested Citation
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