tariff effects on mnc decisions to engage in intra firm and arm s length trade using confidential firm level data from the bureau of economic analysis bea on activities of u s multinational corporations mncs and their canadian affiliates we study the dramatic growth of intra firm and arm s length u s canada trade over the 1984 95 period we find that decisions to engage in intra firm and arm s length trade are essentially unrelated to tariff and transport cost reductions over this sample period thus we find that the increase in trade occurred almost entirely on the intensive rather than the extensive margin this is consistent with case study evidence in keane and feinberg 2006 where mnc executives consistently indicate that the modest tariff reductions of the 1984 95 period were not sufficient to justify fixed costs of overhauling international supply chains our results have important implications for recent influential models of international trade that rely on sensitivity of intra firm trade to tariffs at the extensive margin to explain how small tariff declines could have led to the explosion of intra firm trade since the 1980s we also find that initial conditions i e 1983 tariffs are uncorrelated with whether firms engaged in intra firm or arm s length trade activity at the start of the sample period this result is surprising as it implies that firms industries with a greater propensity to engage in trade were not in general successful at lobbying for more favourable tariff treatment a l aide de donnees confidentielles au niveau de la firme du bureau of economic analysis bea a propos des activites des firmes plurinationales fpn americaines et de leurs succursales canadiennes on etudie la croissance dramatique du commerce usa canada tant intra firme qu a bout de bras pour la periode 1984 95 il appert que les decisions de s engager dans l un et l autre commerce sont fondamentalement non reliees aux reductions des couts de transport et des tarifs au cours de cette periode on decouvre que l accroissement du commerce s est produit presqu entierement a la marge intensive plutot qu a la marge extensive c est en ligne avec les resultats de l etude de cas de keane et feinberg 2006 ou les cadres des fpn ont systematiquement indique que les modestes reductions de tarifs entre 1984 et 1995 n etaient pas suffisantes pour justifier les couts fixes impliques par la modification de leurs chaines de production internationales ces resultats ont des implications importantes pour certains modeles influents de commerce international qui sont ancres dans une sensibilite du commerce intra firme aux tarifs a la marge extensive pour expliquer comment de faibles chutes de tarifs ont pu engendrer une explosion du commerce intra firme depuis les annees 80 on montre aussi que les conditions initiales e g les tarifs de 1983 ne sont pas co reliees avec le fait que la firme est engagee ou non dans l un ou l autre commerce en debut de periode le resultat est surprenant parce qu il implique que firmes et industries ayant une plus grande propension a commercer n ont pas eu de succes dans leur lobby pour obtenir un traitement tarifaire plus favorable

fdi and taxation a meta study despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses it still remains open whether or when tax competition is harmful moreover the influence of tax differentials on multinationals decisions is still insufficiently analyzed thus economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of fdi with respect to company taxation as a result the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence in this paper we extend former meta analyses on fdi and taxation in three ways first we add the most recent publications unconsidered in meta analyses up to date second we apply a different methodology by using a broad set of meta regression estimators and explicitly discuss which one is most suitable for application to our meta data third we address some important issues in research on fdi and taxation to the clarification of which meta analysis can make valuable contributions these issues are mainly the influence of variables which might moderate effects of tax differentials e g public spending the implications of using aggregate fdi data as opposed to firm level information on measured tax effects the implications of bilateral effective tax rates and the possible presence of publication bias in primary research

the prisoners dilemma in the invisible hand an analysis of intrafirm productivity this paper attempts to show that it is useful to view productivity as a prisoners dilemma problem that conventions are alternative solutions to the prisoners dilemma that effort conventions are usually nonoptimal and that a shock is necessary in order to shift from one nonoptimal solution to another within this framework the invisible hand does not produce a pareto optimal result it is consistent with any number of nonoptimal effort conventions

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

competitiveness through management of diversity effects on stock price valuation this study s premise is that firms that can lower their costs and enhance their differentiation through the effective management of their human resources have a competitive advantage using data fr

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

u s canada trade liberalization and mnc production location using confidential firm level panel data from the bureau of economic analysis we examine how the bilateral trade flows of u s multinational corporations mncs and their canadian affiliates responded to u s canadian tariff reductions from 1983 to 1992 we find that canadian affiliate sales to the united states are negatively correlated with canadian tariffs but u s parent sales to canadian affiliates have little association with canadian tariffs these results contradict the notion that canadian tariff reductions would lead to a hollowing out of canadian manufacturing we also find substantial heterogeneity in mnc responses to tariff changes within narrowly defined manufacturing industries overall bilateral trade liberalization is trade creating as u s mncs integrated their north american production such that canadian affiliates increased sales to the united states and reduced domestic sales

do swedish multinationals pay less in taxes than domestic firms in recent years there has been growing concern that multinational enterprises mnes engage in strategic tax planning in order to shift profits to low tax jurisdictions this common perception is generally confirmed by empirical evidence which is foremost provided for countries with high corporate taxes and relatively complex tax systems we investigate whether multinational firms in a country with a comparatively more competitive tax system undertake profit shifting we do this by using detailed census data from corporate income statements and balance sheets filed by swedish manufacturing firms between 1997 and 2007 many previous studies have used tax rate differences to identify profit shifting these studies however run the risk of overestimating the amount of tax shifting as this method entangles tax planning activities with the effect a lower corporate tax rate has on resulting profits we avoid this by comparing mnes with domestic firms unable to benefit from other tax jurisdictions in particular we identify systematic differences in tax payments earnings before interest and taxes and equity ratios between multinational and comparable domestic firms based on propensity score matching in addition we examine the tax behavioral impact of acquiring multinational status using difference in differences estimations and or propensity score matching our results reveal that the extent to which multinational firms have lower tax payments than their domestic counterparts depends on their production characteristics and foreign market outreach in particular we find evidence indicating that firms operating in few foreign markets and firms that become multinational engage in profit shifting from sweden less

reversal of migration flows a fresh look at the german reunification we investigate the dynamic effects of interregional labor market integration on migration flows capital formation and the price for housing services the co evolution of these variables depends on initial conditions at the time of labor market integration in an initially capital poor economy there may be a reversal of migration flows during the transition to the steady state while housing costs are increasing over time although capital may accumulate while labor emigrates early in the transition the causal effect of immigration on capital investments and housing costs is positive we present new data on the evolution of net migration flows and rental rates for housing in east germany after 1990 our results are consistent with the presented evidence in the reverse migration scenario

organizational culture and performance abstract organizations are all around us culture is trickier to analyze and even to see we consider both the effect of management on culture and the effect of culture on performance we begin by describing an intervention that dramatically improved outcomes and conspicuously included a culture change component we then use details from this intervention to describe potential empirical analyses of the association between organizational culture and performance in this and similar settings finally we describe opportunities for theoretical models to explore how and why organizational culture might influence organizational performance

geographic income shifting by multinational corporations in response to tax rate changes we investigate geographic income shifting by 191 u s multinational corporations in response to worldwide changes in tax rates during 1984 90 between 1984 and 1986 the united kingdom reduced corporate tax rates from a maximum of 45 to 35 and in 1985 france reduced rates from 50 to 45 following these reductions in european rates the united states reduced top corporate tax rates from 46 to 34 between 1986 and 1988 canadian rates increased between 1984 and 1986 and then decreased through 1989 beginning in 1988 numerous countries enacted tax cuts apparently in response to those that occurred earlier in other countries as discussed in section 3 differential changes in tax rates provide incentives for geographic income shifting by multinational firms we identify two subperiods during 1984 90 in which relative tax rate changes

taking stock of work family initiatives how announcements of family friendly human resource decisions affect shareholder value this study examines share price reactions to 231 work family human resource policies adopted by fortune 500 companies and announced in the wall street journal between 1971 and 1996 consistent with

on corporate governance a study of proxy contests abstract this paper examines a sample of firms experiencing proxy contests for seats on their board of directors dissident shareholders usually fail to obtain a majority of board seats nevertheless they capture some seats via mechanisms such as cumulative voting in over half of the sample contests regardless of proxy contest outcome positive and statistically significant share price performance is associated with the contest that finding is predicted by the standard economic analysis of proxy contests in which the challenges benefit shareholders by improving corporate performance the finding runs counter to the claim of berle 1962 that the economists view of proxy contests is a wholly imaginary picture a portion of the positive share price changes taking place in the early stages of some proxy contests is not permanent however and as suggested by manne 1962 is at least partially attributable to temporary increases in the market value of the vote attached to corporate shares

the effect of the tax reform act of 1986 on the location of assets in financial services firms this paper examines the effects of the tax reform act of 1986 on the international location decisions of u s financial services firms the act included rule changes that made it substantially more difficult for u s firms to defer u s taxes on overseas financial services income held in low tax jurisdictions we use information from the tax returns of u s corporations to examine how local taxes affect the allocation of financial assets held abroad by financial services firms we find that before the act the location of reported assets in financial subsidiaries was responsive to differences in host country tax rates across jurisdictions however after the act differences in host country tax rates no longer explain the distribution of assets held in financial services subsidiaries abroad our results suggest that the tightening of the anti deferral provisions applicable to financial services companies has been successful in diminishing the effect of host country income taxes on asset location decisions

the taxation of passive foreign investment lessons from german experience the paper evaluates the working of german cfc rules that restrict the use of foreign subsidiaries located in low tax countries to shelter passive investment income from home taxation while passive investments make up a significant fraction of german outbound fdi we find that german cfc rules are quite effective in restricting investments in low tax jurisdictions we find evidence that the german 2001 tax reform which unilaterally introduced exemption of passive income in medium and high tax countries has led to some shifting of passive assets into countries for which the exemption was previously limited ce texte evalue l impact des regles imposees aux succursales a l etranger des societes allemandes regles qui limitent l usage de filiales etrangeres localisees dans des pays a fiscalite legere pour mettre les revenus d investissement passif a l abri de la fiscalite dans le pays d origine ces investissements passifs constituent une fraction significative de l investissement direct a l etranger des allemands et on decouvre que les regles allemandes sont tres efficaces pour restreindre les investissements dans des economies a fiscalite legere les resultats montrent que la reforme fiscale allemande de 2001 qui a unilateralement introduit une exemption du revenu passif dans les pays a fiscalite medium or lourde a entraine un deplacement des actifs passifs vers les pays pour lesquels l exemption etait limitee auparavant

does diversity pay race gender and the business case for diversity the value in diversity perspective argues that a diverse workforce relative to a homogeneous one is generally beneficial for business including but not limited to corporate profits and earnings this is in contrast to other accounts that view diversity as either nonconsequential to business success or actually detrimental by creating conflict undermining cohesion and thus decreasing productivity using data from the 1996 to 1997 national organizations survey a national sample of for profit business organizations this article tests eight hypotheses derived from the value in diversity thesis the results support seven of these hypotheses racial diversity is associated with increased sales revenue more customers greater market share and greater relative profits gender diversity is associated with increased sales revenue more customers and greater relative profits i discuss the implications of these findings relative to alternative views of diversity in the workplace

the impact of controlled foreign company legislation on real investments abroad a multi dimensional regression discontinuity design controlled foreign company cfc rules are frequently imposed by countries as part of their anti tax avoidance legislation this paper aims at quantifying the impact of the german cfc rule on the universe of foreign investments held by german multinational firms the german cfc legislation gives rise to a multi dimensional regression discontinuity design which allows us to estimate local average treatment effects along the dimensions determining treatment our results suggest a significant and economically large impact of the cfc legislation on multinationals real activity abroad we also find evidence of some heterogeneity in estimated treatment effects according to parametric as well as nonparametric estimates

the influence of governance infrastructure and corporate governance on profit shifting in this article we develop a conceptual model to examine the influence of quality of country level governance infrastructure and corporate governance effectiveness on profit shifting we empirically test propositions derived from the model with a unique firm level data set and using multiple indicators of governance infrastructure quality and corporate governance mechanisms we estimate that on average about 6 of total pre tax income is shifted out of foreign owned firms in india we show that governance infrastructure that improves collective action and transparency in both the foreign and host country reduces shifting on the other hand secure property rights and efficient contracting in the foreign country increases shifting we also find that monitoring by foreign institutional investors restricts shifting

unobserved tax avoidance and the tax elasticity of fdi abstract this paper investigates the tax responsiveness of multinational firms investment decisions in foreign countries distinguishing firms that are able to avoid taxes avoiders from those that are not non avoiders from a theoretical point of view the tax responsiveness of firms crucially depends on this distinction empirically however a firm s ability to avoid profit taxes is inherently unobservable to the researcher to address this problem we use a finite mixture modeling approach which allows us to distinguish avoiders from non avoiders stochastically from a mixture of distributions of the two types of firms using panel data on the universe of foreign affiliates of german multinational firms over the years 1999 2010 we find that investments of tax avoiders do not respond to host country profit taxes at all while those of non avoiders do about 11 of the affiliates are estimated to be able to avoid taxes these investments account for about 58 of the stock of foreign fixed assets held by german multinational firms abroad a one percentage point increase in the statutory corporate profit tax rate of a host country is found to reduce the fixed assets of non avoiders in that host country by 0 81

diversity and performance this study measures the performance of u s firms initiating same sex domestic partnership benefit ssdpb policies the results show that holding these firms upon their ssdpb initiation in a calendar portfolio earns a four factor annualized excess return alpha of approximately 10 over the 1995 2008 sample period beating 95 of all professional mutual funds in the united states this finding is robust to several tests of reverse causality ssdpb adopters also show significant improvement in operating performance relative to nonadopters this paper was accepted by brad barber finance

event studies in management research theoretical and empirical issues we examined the use of event studies in management research and found that there was inadequate attention paid to theoretical and research design issues this lack of attention may lead to false in

race ranking promotions and pay at a federal facility a logit analysis this study analyzes rank assignments and promotions among a group of federal civilian employees at a u s army base with special attention to racial differences by estimating a multinomial logit model and using pooled data from four different years the authors find that position and compensation although closely related are by no means identical nor are promotions and changes in pay for example the racial differential in compensation at this base is accompanied by a racial differential in ranking under which blacks are more likely than comparable whites to be in blue collar occupations and less likely to be in white collar occupations whereas the gender differential in compensation is accompanied by a gender differential in ranking under which women are more likely than comparable men to be in low level white collar occupations and less likely to be in other occupations similarly a narrowing of the racial differential in earnings over time coexisted with a racial differential in promotions that

double tax discrimination to attract fdi and fight profit shifting the role of cfc rules abstract governments worldwide use targeted tax policies to trade off the gains from increased fdi against the cost of excessive profit shifting by multinational firms we show that nationally optimal tax systems generally incorporate both thin capitalization rules which tax discriminate between purely national and multinational firms and controlled foreign company cfc rules which discriminate between home based and foreign based multinationals in the non cooperative policy equilibrium both thin capitalization rules and cfc rules are set more lenient than if tax policies were chosen cooperatively implying an excessive tax discrimination in favor of multinationals we also analyze the effects of reduced transaction costs for fdi and reduced costs for debt shifting on the optimal policy mix our results correspond to the observed developments of anti avoidance rules in oecd countries

markets and hierarchies and mathematical economic theory over the past decade transaction cost economics has been partially translated in the more mathematical language of game theory and understanding of the costs of transactions has been deepened refined and extended but the translation is incomplete a great deal of human behaviour is missed and doing game theory with more life like models of individuals will bring theory closer to phenomena transaction cost economics particularly the economics of relational contracts provides a major arena for these developments since the important issues of bounded rationality and individual behavior are central to the topic copyright 1996 by oxford university press

the financial impact of product recall announcements in china abstract a product recall can be viewed as a firm s worst nightmare although the long term damage to brand equity and company reputation may be difficult if not impossible to quantify the short term impact on shareholders wealth is readily estimable while many studies have examined this issue in the western context little is known about the financial impact of a product recall announcement in china to advance the knowledge about the financial impact of a product recall announcement we explore this issue using event study methodology in general our findings are congruent with previous research that product recalls result in negative abnormal returns interestingly however we found that chinese companies suffered from greater financial losses than their western counterparts did this study also provides evidence that the chinese food industry experiences a more severe stock market reaction than the automobile industry and that a passive recall strategy was associated with a more negative stock market reaction than a proactive recall strategy we conclude with several future research avenues for global research on product recalls