Multinationals, Minority Ownership and Tax-Efficient Financing Structures

39 Pages Posted: 5 May 2010

See all articles by Dirk Schindler

Dirk Schindler

Erasmus School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science

Multiple version iconThere are 2 versions of this paper

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

Schindler, Dirk and Schjelderup, Guttorm, Multinationals, Minority Ownership and Tax-Efficient Financing Structures (April 2010). CESifo Working Paper Series No. 3034, Available at SSRN: https://ssrn.com/abstract=1599413 or http://dx.doi.org/10.2139/ssrn.1599413

Dirk Schindler (Contact Author)

Erasmus School of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Guttorm Schjelderup

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

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