Debt Shifting and Ownership Structure

Dirk Schindler and Guttorm Schjelderup

No 2011-35, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

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; monority owner-ship (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-09-20
New Economics Papers: this item is included in nep-edu, nep-hrm, nep-lab and nep-ure
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Journal Article: Debt shifting and ownership structure (2012)
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