The present paper argues that the effect of corruption on foreign ownership is not necessarily linear and depends on the level of host corruption. So long as the expected returns from foreign investments exceed its expected costs, higher host corruption will be associated with higher foreign...

This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential...

This paper investigates how multinational firms choose the capital structure of their foreign affiliates in response to political risk. We focus on two choice variables, the leverage and the ownership structure of the foreign affiliate, and we distinguish different types of political risk, such...

Identifying subsidiaries has always been a key issue in preparing consolidated financial statements and is still one of the most difficult accounting issues standard setters have to cope with. Moreover, the current financial crisis and recent accounting scandals have impressively demonstrated...

We propose and test two hypotheses on how multinational (MNC) parents can use different financial contracting arrangements when financing their subsidiaries in order to constrain the rent-seeking behavior of subsidiary management. Furthermore, we also examine how the MNC parent can effectively...

This paper analyses the ownership structure of foreign affiliates of Spanish firms. In contrast to previous studies on the participation degree, the paper highlights the importance of the previous decision to invest abroad. To do so, an econometric model with a limited dependent variable helps...

This study examines the spillover effects of home country institutional and cultural characteristics on the subsidiaries operating in France while they are in the process of making capital structure choices and debt maturity choices. We document that while subsidiaries financing choices are...

One of the most critical decisions top management in corporate groups has to make is the allocation of resources among competing investment opportunities across the group. Information asymmetry between the parent and subsidiaries, however, creates agency conflicts that complicate such...

I analyze the choice between an intercompany loan denominated in the home currency and one denominated in the subsidiary's functional currency. Using US rules for financial accounting and taxes, I model the impact of the loan's currency denomination on a multinational's expected overall tax and...

The immediate U.S. taxation of foreign subsidiaries' passive, but not active income is a scenario of increasing practical importance. This paper builds on Alvin Warren's recent analysis of this partially deferral-tempering case. It clarifies some of the legal and economic mechanics behind...