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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/38940
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| Title: | | The effects of taxation on the location decision of multinational firms: M&A vs. Greenfield investments  |
| Authors: | | Hebous, Shafik Ruf, Martin Weichenrieder, Alfons J. |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper Public Finance 3076 |
| Abstract: | | In this study, we estimate the impacts of differences in international tax rates on the probability of choosing a location for an affiliate of a multinational firm. In particular, we distinguish between the tax sensitivity of Greenfield and M&A investments. Based on a novel firm-level dataset on German outbound FDI, we find evidence that location decisions of M&A investments are less sensitive to differences in tax rates than location decisions of Greenfield investments. According to our logit estimates, and after controlling for firm and country-specific characteristics, the tax elasticity for Greenfield investments is negative and in absolute value significantly larger than that associated with M&A investments. This finding is consistent with a (partial) capitalisation of taxes in the acquisition price when the FDI project takes the form of M&A. |
| Subjects: | | FDI corporate taxation location M&A Greenfield |
| JEL: | | H25 H73 F23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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