The effect of income-shifting aggressiveness on corporate investment

• 成果类型: Article
• 署名作者: De Simone, Lisa; Klassen, Kenneth J.; Seidman, Jeri K.
• 署名单位: University of Texas System; University of Texas Austin; University of Waterloo; University of Virginia
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101491
• 发表日期: 2022
• 关键词: internal capital-markets; MULTINATIONAL-CORPORATIONS; financial constraints; Location decisions; Cash holdings; Tax avoidance; INFORMATION; incentives; strategies; OPERATIONS

摘要

We investigate whether international income-shifting aggressiveness affects local in-vestments. Amid heightened scrutiny of international activities by tax authorities, firms can support income-shifting goals by locating investments consistent with reported in-come. As a consequence, we predict firms that aggressively shift income will make affiliate-level investment decisions less influenced by local investment opportunities than firms that do not aggressively shift income. We use affiliate-level data from multinational corporations to develop a firm-year proxy for the sensitivity of reported income to cross -border tax incentives. Results suggest firm-years with below-median income-shifting aggressiveness exhibit a typical responsiveness of local investments to investment op-portunities, but firm-years with above-median income-shifting aggressiveness exhibit no statistical relation. Consistent with expectations, these results are stronger for firms with better governance or subject to greater tax authority scrutiny. Our tests extend the liter-ature on investment distortions by documenting that multinational corporations' inter-national tax considerations alter their local tangible investment decisions.(c) 2022 Elsevier B.V. All rights reserved.