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,...

This study develops theory and discusses implications of flexibility in income shifting for multinational corporations that have both profit- and loss-making affiliates. Our theoretical model shows that when multinationals do not have flexibility to adjust their income-shifting strategies within...

Thin capitalization rules have become an important element in the corporate tax systems of developed countries. This paper sets up a model where national and multinational firms choose tax-efficient financial structures and countries compete for multinational firms through statutory tax rates...

This study examines the flexibility of multinational firms to adjust their income-shifting strategies -- whether using transfer pricing or internal debt -- during the tax year to react to affiliates' operating losses. We develop the concept that under flexibility, multinationals can adjust their...

This paper analyzes tax competition when welfare maximizing jurisdictions levy source-based corporate taxes and multinational enterprises choose tax-efficient capital-to-debt ratios. Under separate accounting, multinationals shift debt from low-tax to high-tax countries. The Nash equilibrium of...

This article studies the relationship between debt policies of multinational companies (MNCs) and governments' tax strategies. In the first part, it is shown that the ability to shift income from high- to low-tax countries affects MNCs' financial choices. In the second part we show how MNCs'...

We examine whether an anticipated reduction in future repatriation taxes affects the amount of cash U.S. multinationals hold overseas. We find that the expected benefits of a repatriation tax reduction are positively associated with accelerated accumulations of global cash holdings once Congress...

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...

This paper presents a theory model that simultaneously accounts for the financing decisions and ownership structure in affiliates of multinational firms. We find that affiliates of multinationals have higher internal and overall debt ratios and lower rental rates of physical capital than...

Even 50 years after Modigliani/Miller’s irrelevance theorem, the basic question of how firmschoose their capital structure remains unclear. This survey paper aims at summarizing anddiscussing corresponding recent developments in empirical capital structure research, which,in our view, are...