Host country corporate income tax rate and foreign subsidiary survival

Bassam Farah, Rida Elias, Dwarka Chakravarty and Paul Beamish

Journal of World Business, 2021, vol. 56, issue 2

Abstract: Host country tax considerations are critical to multinational enterprise (MNE) foreign direct investment decisions, but understudied in international business (IB) research. We address this gap by examining the relationship between host country corporate income tax rates (HCCITRs) and foreign subsidiary survival. We develop our hypothesis drawing upon location/country-specific advantage theory and international tax literature. Our longitudinal sample (1990–2013) comprises 13,468 MNE subsidiaries in 78 countries. Results indicate a one standard deviation (7.7 %) decrease in HCCITR increases subsidiary survival probability (at any given time) by 33 %. This effect is stronger compared to several well studied explanatory variables in IB survival analysis.

Keywords: Multinational enterprise; Corporate tax; Country specific advantage; Subsidiary; Survival (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:56:y:2021:i:2:s1090951620301140

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DOI: 10.1016/j.jwb.2020.101186

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