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Tax vs. Regulation Policy and the Location of Financial Sector FDI

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Listed:
  • Julia Merz
  • Michael Overesch
  • Georg Wamser

Abstract

This paper analyzes how corporate taxation and regulatory requirements affect the location of financial sector FDI. We use novel information on new financial services entities established by multinational firms in 83 host countries. We find a negative effect of host country taxes on the probability of choosing a particular host location. We can also confirm a significant influence of the regulatory environment. For example, stricter (equity) capital requirements negatively affect location probabilities. Our empirical approach allows us to provide new insight in how a policy measure of a given country affects other countries by estimating cross-country tax and regulation elasticities.

Suggested Citation

  • Julia Merz & Michael Overesch & Georg Wamser, 2015. "Tax vs. Regulation Policy and the Location of Financial Sector FDI," CESifo Working Paper Series 5500, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5500
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5500.pdf
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    More about this item

    Keywords

    financial sector taxation; multinational banks; corporate taxation; mixed logit model;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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