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The Capital Structure of Multinational Companies Under Tax Competition

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  • Paolo Panteghini

Abstract

This article studies the relationship between debt policies of multinational companies (MNCs) and governments' tax strategies. In the first part, it is shown that the ability to shift income from high to low-tax countries affects MNCs' financial choices. In the second part we show how MNCs' financial decisions can affect the tax strategies of two governments competing to attract income. Furthermore we show that, for reasonable levels of risk aversion, the use of an equally weighted portfolio is surprisingly consistent with an expected utility maximizing behavior.

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Bibliographic Info

Paper provided by University of Brescia, Department of Economics in its series Working Papers with number ubs0606.

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Date of creation: 2006
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Handle: RePEc:ubs:wpaper:ubs0606

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  1. Sorensen, Bent E & Wu, Yi-Tsung & Yosha, Oved & Zhu, Yu, 2005. "Home Bias and International Risk Sharing: Twin Puzzles Separated at Birth," CEPR Discussion Papers 5113, C.E.P.R. Discussion Papers.
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  28. repec:ebl:ecbull:v:8:y:2004:i:4:p:1-7 is not listed on IDEAS
  29. Paolo M. Panteghini, 2004. "Neutrality Properties of Firm Taxation under Default Risk," Economics Bulletin, AccessEcon, vol. 8(4), pages 1-7.
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