Accounting theory treats a wide class of equity valuation approaches as equivalent. For example, under clean surplus accounting, the earnings approach is viewed as identical to the discounted dividends approach. Empirical research, however, typically finds that the two valuation approaches do...

This paper surveys tax haven legislation and links the literature on tax havens to the literature on asymmetric information. I argue that the core aim of tax haven legislation is to create private information (secrecy) for the users of tax havens. This leads to moral hazard and transaction costs...

Subsidies to the Norwegian high-tech industries have traditionally been given as "matching grants", i.e. the subsidies are targeted, and the firms have to contribute a 50 % own risk capital to the subsidized projects. Our results suggest that grants do not crowd out privately financed R&D, but...

This paper studies the market and welfare effects of two main tax reforms – the Corporate Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE). Using an imperfect-competition model for a small open economy, it is shown that the well-known neutrality property of ACE does...

Empirical examination of whether R&D subsidies crowd out private investments has been hampered by selection problems. A particular worry is that project quality and research intentions may be correlated with the likelihood of receiving subsidies. Using proposal evaluation data to control for...

There is a growing concern that governments lose substantial corporate tax revenue due to transfer pricing and debt shifting strategies. Existing literature studies debt shifting and transfer pricing separately. In practice, however, the choice of debt-to-asset ratios in affiliates and the...

We examine how a multinational’s choice to centralize or de-centralize its decision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs — here, as a strategic pre-commitment device and a tax...

We model how multinationals structure their borrowing and lending transactions and find that affiliates in high-tax countries have higher internal and overall debt ratios and lower rental rates of physical capital than comparable domestic firms. We also show that affiliates with minority owners...

In a recent article, Huizinga, Laeven and Nicodème (2008) present a novel model that motivates an extensive empirical analysis of international debt shifting. We point out that the model fails to account for internal debt, and that once internal debt is properly accounted for, the external debt...

Multinational corporations can shift income into low-tax countries through transfer pricing and debt financing. While most developed countries use thin capitalization rules to limit the extent to which a subsidiary can be financed with internal debt, a number of developing countries do not. In...