Taxation and the Financial Structure of German Outbound FDI
AbstractThe paper analyzes the financial structure of outbound FDI during the period 1996-2002 by drawing on up to 54,022 firm-year observations of 13,758 German-owned subsidiaries. We find that the tax rate in the host country has a sizeable and significantly positive effect on leverage for wholly-owned foreign unlike partially-owned foreign companies. Most of the effect comes from increased intra-company borrowing, while third-party debt is not significantly affected by tax differences. While wholly-owned subsidiaries react more sensitively to tax rate differentials, they are less sensitive to macroeconomic influences like interest rates.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1612.
Date of creation: 2005
Date of revision:
foreign direct investment; financial structure; capital structure; taxation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-20 (All new papers)
- NEP-EEC-2005-12-20 (European Economics)
- NEP-FMK-2005-12-20 (Financial Markets)
- NEP-PBE-2005-12-20 (Public Economics)
- NEP-PUB-2005-12-20 (Public Finance)
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