Taxation and the Financial Structure of German Outbound FDI

Jack Mintz, Alfons J. Weichenrieder and Alfons Weichenrieder
Authors registered in the RePEc Author Service: Alfons J. Weichenrieder

No 1612, CESifo Working Paper Series from CESifo

Abstract: The paper analyzes the financial structure of outbound FDI during the period 1996-2002 by drawing on up to 54,022 firm-year observations of 13,758 German-owned subsidiaries. We find that the tax rate in the host country has a sizeable and significantly positive effect on leverage for wholly-owned foreign unlike partially-owned foreign companies. Most of the effect comes from increased intra-company borrowing, while third-party debt is not significantly affected by tax differences. While wholly-owned subsidiaries react more sensitively to tax rate differentials, they are less sensitive to macroeconomic influences like interest rates.

Keywords: foreign direct investment; financial structure; capital structure; taxation (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-eec, nep-fmk, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1612

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