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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3076

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects ; Multinational Firms; International Business
• Subject: FDI ; corporate taxation ; location ; M&A ; Greenfield ; Multinationales Unternehmen ; Direktinvestition ; Deutsch ; Standortwahl ; Übernahme ; Unternehmensbesteuerung ; Steuerwettbewerb ; Deutschland ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hebous, Shafik ; Ruf, Martin ; Weichenrieder, Alfons J.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38940
• Last update: 10.03.2025, 11:42 AM CET