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Title:The effects of taxation on the location decision of multinational firms: M&A vs. Greenfield investments PDF Logo
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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