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Corporate structure optimisation for multinational companies

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  • Anken, F.
  • Beasley, J.E.

Abstract

In this paper we consider a multinational corporate structuring problem. This problem involves designing a corporate/organisational structure (across different countries) so as to remit profits from a number of subsidiaries to a single parent company, whilst minimising the tax paid (maximise the amount received at the parent company). This corporate structure is constrained to be a (directed) tree structure. We present a mixed-integer zero-one formulation of the problem that (for the test problems examined) provides very good linear programming relaxation bounds. We also present a tabu search heuristic for the problem which, when combined with the bounds provided by the linear programming relaxation, is able to find provably optimal solutions. Extensions to the basic corporate structuring problem and how they can be dealt with using our heuristic are also discussed. Computational results for the solution (to proven optimality) of publicly available test problems involving up to 150 countries are reported. The largest problem solved previously in the literature to proven optimality involved only 22 countries.

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Bibliographic Info

Article provided by Elsevier in its journal Omega.

Volume (Year): 40 (2012)
Issue (Month): 2 (April)
Pages: 230-243

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Handle: RePEc:eee:jomega:v:40:y:2012:i:2:p:230-243

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Keywords: Heuristics Mathematical programming Optimisation;

References

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  17. Scott D. Dyreng & Bradley P. Lindsey, 2009. "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on U.S. Multinational Firms' Tax Rates," Journal of Accounting Research, Wiley Blackwell, vol. 47(5), pages 1283-1316, December.
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Citations

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Cited by:
  1. Woodside-Oriakhi, M. & Lucas, C. & Beasley, J.E., 2013. "Portfolio rebalancing with an investment horizon and transaction costs," Omega, Elsevier, vol. 41(2), pages 406-420.
  2. Valle, C.A. & Meade, N. & Beasley, J.E., 2014. "Absolute return portfolios," Omega, Elsevier, vol. 45(C), pages 20-41.
  3. Ma, Hong & Cheang, Brenda & Lim, Andrew & Zhang, Lei & Zhu, Yi, 2012. "An investigation into the vehicle routing problem with time windows and link capacity constraints," Omega, Elsevier, vol. 40(3), pages 336-347.

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