International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

Møen, Jarle; Schindler, Dirk; Schjelderup, Guttorm; Bakke, Julia Tropina

doi:10.1080/13571516.2019.1599189

Cited by 11 publications

(6 citation statements)

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“…MNCs' subsidiaries are frequently funded with the parent company's loans since MNCs can exploit the tax advantage of debt more aggressively than national companies (e.g. :Møen, Schindler, Schjelderup, & Tropina, 2011).11 Our conclusions remain unchanged whether we truncate the sample below percentile 1 and above percentile 99 of the variables |DAC|, |WCDAC|, |DD|, Size, Lev, |Roa|, |CFO|, Salesgrowth, and NBanksA.…”

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confidence: 74%

Foreign ownership and financial reporting quality in private subsidiaries

Noguer

Rusanescu

2017

Spanish Journal of Finance and Accounting / Revista Española de

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Los documentos de trabajo del Ivie ofrecen un avance de los resultados de las investigaciones económicas en curso, con objeto de generar un proceso de discusión previo a su remisión a las revistas científicas. Al publicar este documento de trabajo, el Ivie no asume responsabilidad sobre su contenido.Ivie working papers offer in advance the results of economic research under way in order to encourage a discussion process before sending them to scientific journals for their final publication. Ivie's decision to publish this working paper does not imply any responsibility for its content.La Serie EC, coordinada por Matilde Mas, está orientada a la aplicación de distintos instrumentos de análisis al estudio de problemas económicos concretos.Coordinated by Matilde Mas, the EC Series mainly includes applications of different analytical tools to the study of specific economic problems.Todos los documentos de trabajo están disponibles de forma gratuita en la web del Ivie http://www.ivie.es, así como las instrucciones para los autores que desean publicar en nuestras series.Working papers can be downloaded free of charge from the Ivie website AbstractIn a sample of large private Spanish subsidiaries, we find that the magnitude of discretionary accruals is significantly higher when the parent company is foreign than when it is local. Our tests support the thesis of recent research on earnings management strategies within multinational corporations (MNCs), suggesting that the parent company's incentives underlie the observed negative relation between foreign ownership and financial reporting quality at the subsidiary level. In particular, we observe that: (1) the tenure of the controlling shareholder has a negative incremental effect on financial reporting quality in firms under foreign control, but not in subsidiaries of local groups; and (2) the negative association between foreign ownership and financial reporting quality is mainly driven by the subsample of subsidiaries with parent companies located in countries with higher institutional quality than Spain.H3: the relation between foreign ownership and financial reporting quality is sensitive to the institutional quality in the parent company's country of origin.

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confidence: 74%

Foreign ownership and financial reporting quality in private subsidiaries

Noguer

Rusanescu

2017

Spanish Journal of Finance and Accounting / Revista Española de

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“…1 I v tomto případě většina empirických studií přesun dluhu a významný vliv zdanění na financování nadnárodních společností potvrdila, viz např. (Desai, Foley a Hines, 2004;Huizinga, Laeven a Nicodéme, 2008;Arena a Roper, 2010;Møen et al, 2011;Egger et al, 2014 nebo (Miniaci, Parisi a Panteghini, 2014).…”

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Influence of Income Taxation on Indebtedness of Non-financial Firms

Klazar¹,

Slintáková²

2019

Politicka ekonomie

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Influence of Income Taxation on Indebtedness of Non-financial FirmsTheory supposes that corporate income taxation encourages companies to issue debt as opposed to equity finance because interests are deductible while dividends are not. In addition, international differences in tax regimes incentivize multinational firms to shift debt to optimize their taxes. Since a high debt level can have adverse consequences, we decided to find out whether taxation is one of the causes of indebtedness of the non-financial corporate sector. We used a macroeconomic approach, i.e., all the variables were constructed at the country level, and employed data for 17 EU member states for the period 2006-2014. The model for short-term indebtedness suggests that there is a relationship between corporate debt and taxation, especially between the debt-shifting incentive and the thin capitalization rule. However, the model for total indebtedness does not provide any evidence that corporate taxation influences the non-financial corporate sector debt. The firms' debt was affected rather by macroeconomic factors.

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“…In Germany, Overesch and Wamser [24] suggest that tax planning via internal finance is effectively limited by thin-capitalization rules. Møen, Schindler, Schjelderup and Bakke [25] also found that internal and external debt shifting are almost about equally important to German multinationals.…”

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confidence: 92%

The Woebegone State of Companies Income Tax in Nigeria: Evidence from Widespread Tax Avoidance by Profitable Listed Companies

Jim-Suleiman¹,

Ibiamke²

2021

IJFBR

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Profitable companies are expected to pay a 30% companies income tax on their profits earned in Nigeria. However, many companies in Nigeria pay far less due to their application of tax avoidance strategies. This paper report how profitable companies in Nigeria are able to successfully employed the loopholes in the Nigerian tax system to significantly lower their effective tax rate over the past five years. The paper examines 68 companies that are consistently profitable in each of the five years between 2014 and 2018, excluding companies that experienced even one unprofitable year during this period. From the analysis, this paper finds that as a group, the 68 companies examined paid an effective companies income tax rate of only 16.45% over the five-year period -far less than the statutory 30% companies' income tax rate. Based on the evidence, this paper advocate for a strong alternative minimum tax that can do the job it was originally designed to do thereby bring about transparency, equity and fairness in tax payment in Nigeria. This paper adds new knowledge to the understanding of the state of tax avoidance in Nigeria. Finally, identifying firms' aggressive tax planning strategies will close the tax loopholes and boosting tax revenue in Nigeria.

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International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

Cited by 11 publications

References 59 publications

Foreign ownership and financial reporting quality in private subsidiaries

Foreign ownership and financial reporting quality in private subsidiaries

Influence of Income Taxation on Indebtedness of Non-financial Firms

The Woebegone State of Companies Income Tax in Nigeria: Evidence from Widespread Tax Avoidance by Profitable Listed Companies

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