Turnovsky (1995) derives in a continuous-time model of a decentralized economy that the correct specification of the firm’s objective function is to maximize the initial value of its outstanding securities. The firm value is the discounted flow of real earnings. For the discrete-time version...

We present a new model of tax induced transfer pricing as an alternative to the oft-used concealment model. Inspired by interviews with practitioners, we consider a large multinational firm which is audited by the tax authority in the high-tax location. When this country adjusts the transfer...

In recent years several countries have augmented their national tax laws by transfer pricing legislations which intend to limit the leeway of multinational firms to exploit international corporate tax rate differences and relocate profit to low-tax affiliates by distorting intra-firm transfer...

Multinational companies can exploit the tax advantage of debt more aggressively than national companies by shifting debt from affiliates in low tax countries to affiliates in high tax countries. Previous papers have either omitted internal debt or external debt from the analysis. We are the...

If conventional instruments of strategic trade policy are unavailable, the system of foreign profit taxation and transfer price guidelines may serve as surrogate policy instruments. In this paper, I consider a model where firms from two countries compete with each other on a third market. I...

This paper studies corporate tax competition if it is costly to learn some of the elements that determine the effective tax burden. Search cost may, but need not, eliminate the tax competition pressure. The outcome depends on the boundaries of tax rate and tax base choices. Search cost can...

Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to...

This paper explores the effects of tax provisions aimed at restricting multinationals’ tax planning on foreign direct investment (FDI). Using a unique dataset which allows us to observe the worldwide activities of a large panel of multinational firms, we test how limitations of interest tax...

We analyze how interactions between corporate taxation and corporate governance affect shareholder capital. Using a model with strategic interaction between managers and outside shareholders, we hypothesize that, while an increase in the corporate tax rate decreases shareholder capital, an...