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Firm performance following foreign acquisitions in Norway: Evidence of profit shifting?*

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  • Bakke Julia Tropina

    (SNF—Center for Applied Research at NHH, and NOCET, NHH Norwegian School of Economics, Helleveien 30, N-5045, Bergen, Norway)

Abstract

The paper examines what happened to the profitability of foreign-acquired firms following acquisition in Norway in the period 1994–2005. Propensity score matching combined with a difference-in-difference estimator is used to show that the profitability of the firms acquired goes down significantly following the acquisition. Cost elements, driving the lower profitability of the foreign-acquired firms, are the elements that could reflect transfer price manipulations. Furthermore, the results indicate that despite deteriorating financial performance, there is no significant change in the operating efficiency, liquidity, or solvency of the acquired firms. This may indicate that the observed changes in profitability can be explained by profit shifting activities of the acquired firms.

Suggested Citation

  • Bakke Julia Tropina, 2023. "Firm performance following foreign acquisitions in Norway: Evidence of profit shifting?*," Nordic Tax Journal, Sciendo, vol. 2023(1), pages 1-21, December.
    • Handle: RePEc:vrs:notajo:v:2023:y:2023:i:1:p:1-21:n:2
    DOI: 10.2478/ntaxj-2023-0001
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    References listed on IDEAS

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    More about this item

    Keywords

    Profit shifting; transfer pricing; multinational companies; propensity score matching;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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