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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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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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  8. Paolo Panteghini, 2005. "S-Based Taxation under Default Risk," Working Papers ubs0506, University of Brescia, Department of Economics.
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  25. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  26. Paolo Panteghini & Guttorm Schjelderup, 2006. "To Invest or not to Invest: A real options approach to FDIs and tax competition," International Tax and Public Finance, Springer, vol. 13(6), pages 643-660, November.
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