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Impact of controlled foreign corporation rules on post-acquisition investment and profit shifting in targets
Hagen, Dominik von
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Harendt, Christoph
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URL:
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https://ub-madoc.bib.uni-mannheim.de/43816
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URN:
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urn:nbn:de:bsz:180-madoc-438162
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Dokumenttyp:
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Arbeitspapier
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Erscheinungsjahr:
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2017
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Titel einer Zeitschrift oder einer Reihe:
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ZEW Discussion Papers
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Band/Volume:
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17-062
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Ort der Veröffentlichung:
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Mannheim
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Fakultät für Betriebswirtschaftslehre > ABWL u. Betriebswirtschaftliche Steuerlehre (Schreiber 1999-2019)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
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MADOC-Schriftenreihe:
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Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
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Fachgebiet:
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330 Wirtschaft
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Fachklassifikation:
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JEL:
F23 , G34 , H25 , H26 , H32 , H73,
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Freie Schlagwörter (Englisch):
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International taxation , CFC rules , profit shifting , multinational entities , crossborder mergers and acquisitions , foreign direct investment
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Abstract:
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We investigate real investment, financial revenues and profits in formerly domestic firms once they enter a multinational entity (MNE) through an acquisition. We argue that following the acquisition, those targets are tax-optimized in a profit shifting context if they are acquired by MNEs with no controlled foreign corporation (CFC) rules in their headquarters’ countries. In this case, we hypothesize that MNE-wide profit shifting opportunities decrease
high-tax targets’ cost of capital, which may have a positive effect on real investment of these
targets. In addition, we hypothesize that financial revenues respectively profits of low-tax targets
increase after the acquisition, since they may become destinations of profit shifting themselves.
In line with the effects on real investment, profits of high-tax targets should decline. We find evidence for the effects on real investment. Further, these effects can no longer be observed in case of existing CFC rules in the acquirer’s headquarters’ country. This finding may suggest that CFC rules effectively mitigate MNE-wide profit shifting which in turn has detrimental investment effects. We also find some evidence for the expected effects for financial revenues but not for the profit measure.
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 | Dieser Eintrag ist Teil der Universitätsbibliographie. |
 | Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt. |
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