Debt shifting and ownership structure

Dirk Schindler, Guttorm Schjelderup*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

23 Citations (Scopus)

Abstract

Previous theoretical studies on the debt shifting behavior of multinationals have assumed affiliates of multinationals to be wholly owned. We develop a model that allows a multinational firm to determine both the leverage and ownership structure in affiliates endogenously. A main finding is that affiliates with minority owners have less debt than wholly owned affiliates and therefore a less tax-efficient financing structure. This is due to an externality that arises endogenously in our model, where costs and benefits of debt shifting are shared asymmetrically between minority and majority owners. Our findings provide a theory framework for recent empirical findings.

Original languageEnglish
Pages (from-to)635-647
Number of pages13
JournalEuropean Economic Review
Volume56
Issue number4
DOIs
Publication statusPublished - May 2012
Externally publishedYes

Fingerprint

Dive into the research topics of 'Debt shifting and ownership structure'. Together they form a unique fingerprint.

Cite this