IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v6y2014i2p54-93.html

Corporate Taxes and Internal Borrowing within Multinational Firms

Author

Listed:
  • Peter Egger
  • Christian Keuschnigg
  • Valeria Merlo
  • Georg Wamser

Abstract

This study develops a theoretical model of a multinational firm with an internal capital market. Hypotheses regarding the role of local versus foreign characteristics such as profit tax rates, lack of institutional quality, financial underdevelopment, and productivity for internal debt financing at the level of foreign affiliates are derived and assessed empirically in a panel dataset covering the universe of German multinationals. We show that differences in nontax incentives given by fundamentals in local and foreign markets can offset or reinforce tax incentives. The results point at a many times higher tax-sensitivity of internal debt financing compared to previous research.

Suggested Citation

  • Peter Egger & Christian Keuschnigg & Valeria Merlo & Georg Wamser, 2014. "Corporate Taxes and Internal Borrowing within Multinational Firms," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 54-93, May.
    • Handle: RePEc:aea:aejpol:v:6:y:2014:i:2:p:54-93
    Note: DOI: 10.1257/pol.6.2.54
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.6.2.54
    Download Restriction: no
    File URL: http://www.aeaweb.org/aej/pol/app/0602/2012-0249_app.pdf
    Download Restriction: no
    File URL: http://www.aeaweb.org/aej/pol/data/0602/2012-0249_data.zip
    Download Restriction: no
    File URL: http://www.aeaweb.org/aej/pol/ds/0602/2012-0249_ds.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:6:y:2014:i:2:p:54-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.