The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight


The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.

Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School
College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing
Additional Information: Transnational Corporations has the copyright for all published articles. Authors may reuse published manuscripts with due acknowledgement.
Uncontrolled Keywords: capital flight, economic development, institutions, tax havens, wealth extraction
Publication ISSN: 1014-9562
Last Modified: 04 Apr 2024 07:31
Date Deposited: 23 Sep 2020 08:37
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Related URLs: https://papers. ... ract_id=3692289 (Author URL)
https://unctad. ... licationid=2849 (Publisher URL)
PURE Output Type: Article
Published Date: 2020-08-31
Accepted Date: 2020-08-01
Authors: Jones, Chris (ORCID Profile 0000-0003-1115-6409)
Temouri, Yama (ORCID Profile 0000-0003-3014-258X)
Ahmed, Ali



Version: Published Version

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