IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Debt shifting and ownership structure

Listed author(s):
  • 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: http://www.sciencedirect.com/science/article/pii/S0014292112000414
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

as
in new window

Handle: RePEc:eee:eecrev:v:56:y:2012:i:4:p:635-647
DOI: 10.1016/j.euroecorev.2012.02.015
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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. Dirk Schindler & Guttorm Schjelderup, 2013. "Transfer Pricing and Debt Shifting in Multinationals," CESifo Working Paper Series 4381, CESifo Group Munich.
  2. Haufler, Andreas & Runkel, Marco, 2012. "Firms' financial choices and thin capitalization rules under corporate tax competition," European Economic Review, Elsevier, vol. 56(6), pages 1087-1103.
  3. Steven G. Rivkin & Eric A. Hanushek & John F. Kain, 2005. "Teachers, Schools, and Academic Achievement," Econometrica, Econometric Society, vol. 73(2), pages 417-458, 03.
  4. 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).
  5. Gabriela Schütz & Heinrich W. Ursprung & Ludger Wößmann, 2008. "Education Policy and Equality of Opportunity," Kyklos, Wiley Blackwell, vol. 61(2), pages 279-308, 05.
  6. Jepsen, Christopher, 2005. "Teacher characteristics and student achievement: evidence from teacher surveys," Journal of Urban Economics, Elsevier, vol. 57(2), pages 302-319, March.
  7. Jonah Rockoff, 2009. "Field Experiments in Class Size from the Early Twentieth Century," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 211-230, Fall.
  8. Lex Borghans & Huub Meijers & Bas Ter Weel, 2008. "The Role Of Noncognitive Skills In Explaining Cognitive Test Scores," Economic Inquiry, Western Economic Association International, vol. 46(1), pages 2-12, 01.
  9. Alison L. Booth & Patrick Nolen, 2012. "Gender differences in risk behaviour: does nurture matter?," Economic Journal, Royal Economic Society, vol. 122(558), pages 56-78, 02.
  10. Scott E. Carrell & Marianne E. Page & James E. West, 2010. "Sex and Science: How Professor Gender Perpetuates the Gender Gap," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1101-1144.
  11. 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.
  12. 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.
  13. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
  14. 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.
  15. 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.
  16. Altshuler, Rosanne & Grubert, Harry, 2003. "Repatriation taxes, repatriation strategies and multinational financial policy," Journal of Public Economics, Elsevier, vol. 87(1), pages 73-107, January.
  17. Buettner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2009. "Taxation and capital structure choice--Evidence from a panel of German multinationals," Economics Letters, Elsevier, vol. 105(3), pages 309-311, December.
  18. Cooray, Arusha & Potrafke, Niklas, 2011. "Gender inequality in education: Political institutions or culture and religion?," European Journal of Political Economy, Elsevier, vol. 27(2), pages 268-280, June.
  19. 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.
  20. Booth, Alison & Nolen, Patrick, 2012. "Choosing to compete: How different are girls and boys?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 542-555.
  21. Ramachandran, Vijaya, 1993. "Technology Transfer, Firm Ownership, and Investment in Human Capital," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 664-670, November.
  22. 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.
  23. Nabanita Datta Gupta & Anders Poulsen & Marie Claire Villeval, 2005. "Male and Female Competitive Behavior - Experimental Evidence," Post-Print halshs-00180022, HAL.
  24. 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 129-144, Spring.
  25. 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 210-240, April.
  26. Egger, Peter & Eggert, Wolfgang & Keuschnigg, Christian & Winner, Hannes, 2010. "Corporate taxation, debt financing and foreign-plant ownership," European Economic Review, Elsevier, vol. 54(1), pages 96-107, January.
  27. Thiess Büttner & Michael Overesch & Ulrich Schreiber & Georg Wamser, 2006. "The Impact of Thin-Capitalization Rules on Multinationals’ Financing and Investment Decisions," CESifo Working Paper Series 1817, CESifo Group Munich.
  28. 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.
  29. 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.
  30. Schneeweis, Nicole & Zweimüller, Martina, 2012. "Girls, girls, girls: Gender composition and female school choice," Economics of Education Review, Elsevier, vol. 31(4), pages 482-500.
  31. 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.
  32. 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.
  33. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  34. Francesca Barion & Raffaele Miniaci & Paolo Panteghini & Maria Laura Parisi, 2010. "Profit Shifting by Debt Financing in Europe," CESifo Working Paper Series 2985, CESifo Group Munich.
  35. Fuest, Clemens & Hemmelgarn, Thomas, 2005. "Corporate tax policy, foreign firm ownership and thin capitalization," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 508-526, September.
  36. 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.
  37. 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.
  38. Olivier Compte & Andrew Postlewaite, 2004. "Confidence-Enhanced Performance," American Economic Review, American Economic Association, vol. 94(5), pages 1536-1557, December.
  39. Jack Mintz & Alfons Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
  40. 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.
  41. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  42. 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.
  43. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  44. McEwan, Patrick J., 2003. "Peer effects on student achievement: evidence from Chile," Economics of Education Review, Elsevier, vol. 22(2), pages 131-141, April.
  45. Roy Howsen & Michelle Trawick, 2007. "Teachers, race and student achievement revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1023-1027.
  46. 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.
  47. Dee, Thomas S., 2004. "Are there civic returns to education?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1697-1720, August.
  48. repec:esx:essedp:672 is not listed on IDEAS
  49. Mintz, Jack & Smart, Michael, 2004. "Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada," Journal of Public Economics, Elsevier, vol. 88(6), pages 1149-1168, June.
  50. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away From Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1067-1101.
  51. 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.
  52. 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.
  53. Alfons Weichenrieder & Helen Windischbauer, 2008. "Thin-Capitalization Rules and Company Responses Experience from German Legislation," CESifo Working Paper Series 2456, CESifo Group Munich.
  54. 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.
  55. 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.
  56. Kant, Chander, 1990. "Multinational firms and government revenues," Journal of Public Economics, Elsevier, vol. 42(2), pages 135-147, July.
  57. 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.
  58. 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.
  59. 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.
  60. 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.
  61. 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.
  62. 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.
  63. 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.
  64. Alfons Weichenrieder, 2009. "Profit shifting in the EU: evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 281-297, June.
  65. Lefgren, Lars, 2004. "Educational peer effects and the Chicago public schools," Journal of Urban Economics, Elsevier, vol. 56(2), pages 169-191, September.
  66. 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.
  67. 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, July.
  68. Eisenkopf, Gerald, 2010. "Peer effects, motivation, and learning," Economics of Education Review, Elsevier, vol. 29(3), pages 364-374, June.
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: (Dana Niculescu)

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.