IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Debt shifting and ownership structure

  • Schindler, Dirk
  • Schjelderup, Guttorm

Previous theoretical studies on the debt shifting behavior of multinationals have assumed affiliates of multinationals to be wholly owned. We develop a model that allows a multinational firm to determine both the leverage and ownership structure in affiliates endogenously. A main finding is that affiliates with minority owners have less debt than wholly owned affiliates and therefore a less tax-efficient financing structure. This is due to an externality that arises endogenously in our model, where costs and benefits of debt shifting are shared asymmetrically between minority and majority owners. Our findings provide a theory framework for recent empirical findings.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 4 ()
Pages: 635-647

in new window

Handle: RePEc:eee:eecrev:v:56:y:2012:i:4:p:635-647
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Muriel Niederle & Lise Vesterlund, 2010. "Explaining the Gender Gap in Math Test Scores: The Role of Competition," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 129-44, Spring.
  2. Claudia Goldin & Lawrence F. Katz, 2011. "Putting the "Co" in Education: Timing, Reasons, and Consequences of College Coeducation from 1835 to the Present," Journal of Human Capital, University of Chicago Press, vol. 5(4), pages 377 - 417.
  3. Alison L. Booth & Patrick Nolen, 2009. "Gender Differences in Risk Behaviour: Does Nurture Matter?," CEPR Discussion Papers 601, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  4. Foster, Gigi, 2006. "It's not your peers, and it's not your friends: Some progress toward understanding the educational peer effect mechanism," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1455-1475, September.
  5. Thomas S. Dee, 2005. "A Teacher Like Me: Does Race, Ethnicity, or Gender Matter?," American Economic Review, American Economic Association, vol. 95(2), pages 158-165, May.
  6. Jack Mintz & Alfons Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
  7. Marie-Claire Villeval & Nabanita Datta Gupta & Anders Poulsen, 2005. "Male and Female Competitive Behavior - Experimental Evidence," Working Papers 0512, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  8. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  9. Jack Mintz & Michael Smart, 2001. "Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada," CESifo Working Paper Series 554, CESifo Group Munich.
  10. Booth, Alison L. & Nolen, Patrick J., 2009. "Choosing to Compete: How Different Are Girls and Boys?," IZA Discussion Papers 4027, Institute for the Study of Labor (IZA).
  11. Scott E. Carrell & Marianne E. Page & James E. West, 2009. "Sex and Science: How Professor Gender Perpetuates the Gender Gap," NBER Working Papers 14959, National Bureau of Economic Research, Inc.
  12. Konrad, Kai A. & Erik Lommerud, Kjell, 2001. "Foreign direct investment, intra-firm trade and ownership structure," European Economic Review, Elsevier, vol. 45(3), pages 475-494, March.
  13. McEwan, Patrick J., 2003. "Peer effects on student achievement: evidence from Chile," Economics of Education Review, Elsevier, vol. 22(2), pages 131-141, April.
  14. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
  15. Schütz, Gabriela & Ursprung, Heinrich W. & Woessmann, Ludger, 2005. "Education Policy and Equality of Opportunity," IZA Discussion Papers 1906, Institute for the Study of Labor (IZA).
  16. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 121-148.
  17. Meijers, Huub & Borghans, Lex & Weel, Bas ter, 2006. "The Role of Noncognitive Skills in Explaining Cognitive Test Scores," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  18. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away From Competition? Do Men Compete Too Much?," NBER Working Papers 11474, National Bureau of Economic Research, Inc.
  19. Roland G. Fryer & Steven D. Levitt, 2010. "An Empirical Analysis of the Gender Gap in Mathematics," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 210-40, April.
  20. Büttner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2006. "Taxation and capital structure choice: evidence from a panel of German multinationals," ZEW Discussion Papers 06-67, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  22. Nicole Schneeweis & Martina Zweimüller, 2009. "Girls, girls, girls: gender composition and female school choice," Economics working papers 2009-07, Department of Economics, Johannes Kepler University Linz, Austria.
  23. Cooray, Arusha & Potrafke, Niklas, 2011. "Gender inequality in education: Political institutions or culture and religion?," Munich Reprints in Economics 20110, University of Munich, Department of Economics.
  24. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  25. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
  26. Andreas Haufler & Marco Runkel, 2008. "Firms’ Financial Choices and Thin Capitalization Rules under Corporate Tax Competition," CESifo Working Paper Series 2429, CESifo Group Munich.
  27. Ramachandran, Vijaya, 1993. "Technology Transfer, Firm Ownership, and Investment in Human Capital," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 664-70, November.
  28. Francesca Barion & Raffaele Miniaci & Paolo M Panteghini & Maria Laura Parisi, 2010. "Profit shifting by debt financing in Europe," Working Papers 1007, University of Brescia, Department of Economics.
  29. Rosanne Altshuler & Harry Grubert, 2002. "Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy," Departmental Working Papers 200009, Rutgers University, Department of Economics.
  30. Roy Howsen & Michelle Trawick, 2007. "Teachers, race and student achievement revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1023-1027.
  31. Lavy, Victor, 2008. "Do gender stereotypes reduce girls' or boys' human capital outcomes? Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2083-2105, October.
  32. Olivier Compte & Andrew Postlewaite, 2003. "Confidence-Enhanced Performance," PIER Working Paper Archive 03-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  33. Jack Mintz, 2004. "Conduit Entities: Implications of Indirect Tax-Efficient Financing Structures for Real Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(4), pages 419-434, 08.
  34. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
  35. Kant, Chander, 1990. "Multinational firms and government revenues," Journal of Public Economics, Elsevier, vol. 42(2), pages 135-147, July.
  36. Lefgren, Lars, 2004. "Educational peer effects and the Chicago public schools," Journal of Urban Economics, Elsevier, vol. 56(2), pages 169-191, September.
  37. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "The costs of shared ownership: Evidence from international joint ventures," Journal of Financial Economics, Elsevier, vol. 73(2), pages 323-374, August.
  38. Jan Svejnar & Stephen C. Smith, 1984. "The Economics of Joint Ventures in Less Developed Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 99(1), pages 149-167.
  39. Hovakimian, Armen & Hovakimian, Gayane & Tehranian, Hassan, 2004. "Determinants of target capital structure: The case of dual debt and equity issues," Journal of Financial Economics, Elsevier, vol. 71(3), pages 517-540, March.
  40. Christian Keuschnigg & Peter Egger & Wolfgang Eggert & Hannes Winner, 2009. "Corporate Taxation, Debt Financing and Foreign Plant Ownership," University of St. Gallen Department of Economics working paper series 2009 2009-01, Department of Economics, University of St. Gallen.
  41. Jonah Rockoff, 2009. "Field Experiments in Class Size from the Early Twentieth Century," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 211-30, Fall.
  42. Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 1998. "Teachers, Schools, and Academic Achievement," NBER Working Papers 6691, National Bureau of Economic Research, Inc.
  43. Holmlund, Helena & Sund, Krister, 2008. "Is the gender gap in school performance affected by the sex of the teacher," Labour Economics, Elsevier, vol. 15(1), pages 37-53, February.
  44. Lee, Valerie E. & Lockheed, Marlaine E., 1989. "The effects of single-sex schooling on student achievement and attitudes in Nigeria," Policy Research Working Paper Series 206, The World Bank.
  45. Dirk Schindler & Guttorm Schjelderup, 2013. "Transfer Pricing and Debt Shifting in Multinationals," CESifo Working Paper Series 4381, CESifo Group Munich.
  46. Büttner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2008. "The impact of thin-capitalization rules on multinationals' financing and investment decisions," Discussion Paper Series 1: Economic Studies 2008,03, Deutsche Bundesbank, Research Centre.
  47. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance in Competitive Environments: Gender Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1049-1074.
  48. Uri Gneezy & Kenneth L. Leonard & John A. List, 2009. "Gender Differences in Competition: Evidence From a Matrilineal and a Patriarchal Society," Econometrica, Econometric Society, vol. 77(5), pages 1637-1664, 09.
  49. Mintz, Jack M. & Weichenrieder, Alfons J., 2010. "The Indirect Side of Direct Investment: Multinational Company Finance and Taxation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014491, December.
  50. Eisenkopf, Gerald, 2010. "Peer effects, motivation, and learning," Economics of Education Review, Elsevier, vol. 29(3), pages 364-374, June.
  51. Thomas S. Dee, 2003. "Are There Civic Returns to Education?," NBER Working Papers 9588, National Bureau of Economic Research, Inc.
  52. Link, Charles R. & Mulligan, James G., 1991. "Classmates' effects on black student achievement in public school classrooms," Economics of Education Review, Elsevier, vol. 10(4), pages 297-310, December.
  53. repec:esx:essedp:672 is not listed on IDEAS
  54. Jonah E. Rockoff, 2004. "The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 94(2), pages 247-252, May.
  55. Alfons Weichenrieder & Helen Windischbauer, 2008. "Thin-Capitalization Rules and Company Responses Experience from German Legislation," CESifo Working Paper Series 2456, CESifo Group Munich.
  56. Alfons J. Weichenrieder & Jack Mintz, 2008. "What determines the use of holding companies and ownership chains?," Working Papers 0803, Oxford University Centre for Business Taxation.
  57. Chowdhry, Bhagwan & Coval, Joshua D., 1998. "Internal financing of multinational subsidiaries: Debt vs. equity1," Journal of Corporate Finance, Elsevier, vol. 4(1), pages 87-106, March.
  58. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2004. "A Multinational Perspective on Capital Structure Choice and Internal Capital Markets," Journal of Finance, American Finance Association, vol. 59(6), pages 2451-2487, December.
  59. Matthew Neidell & Jane Waldfogel, 2010. "Cognitive and Noncognitive Peer Effects in Early Education," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 562-576, August.
  60. Christopher Jepsen, 2005. "Teacher characteristics and student achievement: evidence from teacher surveys," Open Access publications 10197/4445, School of Economics, University College Dublin.
  61. Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1211-1230.
  62. Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," NBER Working Papers 4776, National Bureau of Economic Research, Inc.
  63. Sutter, Matthias & Glätzle-Rützler, Daniela, 2010. "Gender Differences in Competition Emerge Early in Life," IZA Discussion Papers 5015, Institute for the Study of Labor (IZA).
  64. Shafik Hebous & Alfons Weichenrieder, 2010. "Debt financing and sharp currency depreciations: wholly versus partially-owned multinational affiliates," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(2), pages 281-302, June.
  65. Alfons Weichenrieder, 2007. "Profit Shifting in the EU: Evidence from Germany," CESifo Working Paper Series 2043, CESifo Group Munich.
  66. Clemens Fuest & Thomas Hemmelgarn, 2003. "Corporate Tax Policy, Foreign Firm Ownership and Thin Capitalization," CESifo Working Paper Series 1096, CESifo Group Munich.
  67. Robert E. Lipsey, 2004. "Home- and Host-Country Effects of Foreign Direct Investment," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 333-382 National Bureau of Economic Research, Inc.
  68. Rita de la Feria & Ana Paula Dourado, 2008. "Thin Capitalization Rules in the Context of the CCCTB," Working Papers 0804, Oxford University Centre for Business Taxation.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:56:y:2012:i:4:p:635-647. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.