In the absence of financial frictions, the purpose of thin capitalization rules is to limit multinational firms’ possibilities of engaging in tax planning via debt shifting. This paper analyzes the effects of thin capitalization rules in the case where firms have limited access to external...

This paper examines the flexibility of multinational firms to use income-shifting strategies within a tax year to react to operating losses. First, we develop an analytical model that considers how affiliate losses can be adjusted by using the transfer prices of tangible and intangible assets,...

Thin capitalization rules (TCRs) aim to mitigate profit shifting by multinational corporations (MNCs) but, by raising the cost of capital for affected affiliates, can also negatively affect real investment. Exploiting unique panel data on multinational companies in 34 countries during 2006-2014,...

Using bank balance sheet data, we find evidence that leverage and asset risk of European multinational banks in the crisis and post-crisis period is affected by corporate taxes in their host country as well as by the tax rates in all the jurisdictions where the banking group operates. Then, we...