A clean and discreet service: The role of corruption and secrecy in profit shifting by multinational firms

Nouf Binhadab, Robert Gillanders and Thomas McCluskey

Journal of International Development, 2023, vol. 35, issue 7, 1551-1573

Abstract: We investigate the importance of corruption in shaping the profit‐shifting behaviour of multinational firms. Using country‐level panel data, we find a significant and positive correlation between corruption and profit shifting. Our findings are consistent with several theoretical arguments predicting that corruption may both facilitate and provide an incentive to firm behaviour that deprives poorer countries of much needed tax revenues. Our findings are robust across a number of corruption and profit‐shifting measures, as well as to an instrumental variable approach that controls for the potential endogeneity between profit shifting and corruption. Our findings also indicate a negative and significant relationship between financial secrecy and outward profit shifting. We conclude that corruption and financial secrecy undermine global efforts to tackle profit shifting by multinational firms.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/jid.3739

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:35:y:2023:i:7:p:1551-1573

Access Statistics for this article

Journal of International Development is currently edited by Paul Mosley and Hazel Johnson

More articles in Journal of International Development from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().