The Effect of Tax and Nontax Country Characteristics on the Global Equity Supply Chains of U.S. Multinationals

49 Pages Posted: 14 Jan 2015

See all articles by Scott Dyreng

Scott Dyreng

Duke University - Accounting

Bradley P. Lindsey

Utah State University - School of Accountancy

Kevin Markle

Michigan State University

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

Date Written: January 9, 2015

Abstract

We examine the global equity supply chains of U.S. multinationals to explore how tax and nontax country characteristics affect whether firms use foreign holding companies and where they locate them. We find that U.S. multinationals supply equity from headquarters to their foreign operating companies through foreign holding companies located in countries that lightly tax equity distributions. We also find that foreign holding companies tend to be located in countries with less corruption and investment risk than the countries in which the operating companies they own are located. In addition, we provide empirical evidence that the Netherlands, a well-known location for international tax planning, is a particularly popular site for foreign equity holding companies. Our findings contribute to a nascent literature that examines ownership chains in multinational companies and a larger literature on subsidiary location decisions for multinationals. The findings also provide empirical evidence that could be useful to governments in developed countries as they attempt to reform international tax policy.

Keywords: international, tax, multinational

JEL Classification: H25, L20, K34

Suggested Citation

Dyreng, Scott and Lindsey, Bradley P. and Markle, Kevin and Shackelford, Douglas A., The Effect of Tax and Nontax Country Characteristics on the Global Equity Supply Chains of U.S. Multinationals (January 9, 2015). Available at SSRN: https://ssrn.com/abstract=2549176 or http://dx.doi.org/10.2139/ssrn.2549176

Scott Dyreng

Duke University - Accounting ( email )

Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States

Bradley P. Lindsey

Utah State University - School of Accountancy ( email )

Huntsman School of Business
3540 Old Main Hill
Logan, UT UT 84322-3540
United States
435.797.4126 (Phone)

Kevin Markle (Contact Author)

Michigan State University ( email )

East Lansing, MI
United States

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3197 (Phone)
919-962-4727 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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