Democracy and Natural Resources: Their Institutional Impact on Tax Haven Use by Emerging Market Multinational Enterprises

Kelon Felix (), Chris Jones (), Johan Rewilak () and Yama Temouri ()
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Kelon Felix: University College Birmingham
Chris Jones: Aston University
Johan Rewilak: Loughborough University
Yama Temouri: Kedge Business School

Management International Review, 2025, vol. 65, issue 5, No 5, 903-947

Abstract: Abstract This paper examines how the institutional environment influences multinational enterprise (MNE) strategies regarding tax haven use. We develop a theoretical framework linking democracy and natural resource endowments to the strategic use of tax havens in emerging markets. Using data from 4630 emerging market MNEs (EMNEs) between 2008 and 2018, we find that higher levels of democracy in an EMNE’s country of origin are associated with reduced tax haven use. However, the use of tax havens by EMNEs increases with higher natural resource rents in their home economies. Additionally, we find that natural resource rents moderate the impact of democracy on tax haven use, such that the natural resource curse weakens the positive effect of democracy on firm behavior. Our results offer important managerial and policy implications.

Keywords: Tax havens; Democracy; Autocracy; Natural resources; Multinational enterprises; Emerging markets (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11575-025-00592-6

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