Debt shifting and ownership structure

Dirk Schindler and Guttorm Schjelderup

European Economic Review, 2012, vol. 56, issue 4, 635-647

Abstract: 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.

Keywords: Multinationals; Tax-efficient financing structures; Minority ownership (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (41)

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Working Paper: Debt Shifting and Ownership Structure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:4:p:635-647

DOI: 10.1016/j.euroecorev.2012.02.015

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