Abstract
The use of tax havens by multinationals is a pervasive activity in international
business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens
and has important policy implications at both the domestic and the international
level.
business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens
and has important policy implications at both the domestic and the international
level.
| Original language | English |
|---|---|
| Pages (from-to) | 1-30 |
| Number of pages | 30 |
| Journal | Transnational Corporations |
| Volume | 27 |
| Issue number | 2 |
| Publication status | Published - 31 Aug 2020 |
Bibliographical note
Transnational Corporations has the copyright for all published articles. Authors mayreuse published manuscripts with due acknowledgement.
Keywords
- capital flight, economic development, institutions, tax havens, wealth extraction