Internal capital markets are important determinants of investment and economic growth in the modern economy. We exploit a regulatory experiment on short selling restrictions and microdata on multinationals' foreign operations to test whether external governance pressure from short selling...

Using confidential data on the foreign operations of US multinational firms, I examine innovation in the context of an unexpected policy shock that facilitated foreign tax arbitrage. I find that after the shock, US multinationals shifted more of their intellectual property and taxable income to...