Logo
Munich Personal RePEc Archive

Democracy, Institutions, and International Profit-Shifting

Delis, Fotios and Economidou, Claire and Hasan, Iftekhar (2022): Democracy, Institutions, and International Profit-Shifting.

[thumbnail of MPRA_paper_111715.pdf]
Preview
PDF
MPRA_paper_111715.pdf

Download (1MB) | Preview

Abstract

Does constitutional democratization affect profit-shifting strategies among firms? Using a global sample of multinational enterprises, we develop a subsidiary-year measure of profit-shifting and examine how this measure responds to changes in constitutional democracy and the subsequent evolution of the host country’s institutions. Our main findings show that a one-standard-deviation increase in the Polity IV democracy index yields an approximately 37% decrease in profit-shifting to other countries. Protection of property rights, contract enforcement, and superior regulatory quality emerge as the key institutional channels that define the decision to keep profits at home. Our results are robust to an instrumental variables approach and a large battery of additional robustness tests.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.