International Debt Shifting: Do Multinationals Shift Internal or External Debt?

Jarle Møen, Dirk Schindler, Guttorm Schjelderup and Julia Tropina ()
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Julia Tropina: Department of Economics, Norwegian School of Economics, 5045 Bergen, Norway

No 2011-40, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: We examine the capital structures of multinational companies. Multinational companies can exploit the tax advantage of debt more aggressively than national companies by shifting debt from affiliates in low-tax countries to affiliates in high-tax countries. Previous papers have omitted either internal debt or external debt from the analysis. We are the first to model the companies’ choice between internal and external debt shifting, and show that it is optimal to use both types of debt in order to save taxes. Using a large panel of German multinationals, we find strong empirical support for our model. The estimated coefficients suggest that internal and external debt shifting are of about equal relevance.

Keywords: Corporate taxation; multinationals; capital structure; international debt-shifting; tax avoidance (search for similar items in EconPapers)
JEL-codes: F23 G32 H25 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-10-07
New Economics Papers: this item is included in nep-acc, nep-cis and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: International Debt Shifting: Do Multinationals Shift Internal or External Debt? (2013)
Working Paper: International Debt Shifting: Do Multinationals Shift Internal or External Debt? (2011)
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