Tardios, J.A. and Clegg, L.J. orcid.org/0000-0002-9787-7196 (2025) Outbound Profit Shifting and the Propensity to Engage in Cross-Border Acquisitions. British Journal of Management, 36 (1). pp. 34-55. ISSN 1045-3172
Abstract
Accountability-avoiding foreign direct investment (FDI) is a category of financial motives explaining where firms invest and how, yet our grasp of this phenomenon is incomplete. In contrast with tax-haven FDI, where multinational enterprises (MNEs) invest in a host country to pursue inbound profit shifting, we consider a novel motive – FDI attracted by low host country financial transparency that enables outbound profit shifting (OPS). Cross-border acquisitions (CBAs) are a takeover route to achieving OPS and global tax optimization. Our empirical context is 39,951 CBAs by 315 acquirers from 26 countries in the 1996–2015 period. We hypothesize and empirically show a positive relationship between OPS and CBAs and the probability that equity ownership of CBAs will be high. We find that the relationship between OPS and CBAs is stronger the more attractive or income unequal the host market, or when the multinational's industry is vertically or horizontally integrated. We attribute the lack of support for our hypothesis that MNEs require in-house capability to conduct OPS to tax planning consultancies’ services. These findings highlight the role of low financial transparency as a novel locational determinant of OPS-pursuing FDI and emphasize the distinction between inbound and outbound profit shifting as manifestations of accountability-avoiding FDI.
Metadata
Item Type: | Article |
---|---|
Authors/Creators: |
|
Copyright, Publisher and Additional Information: | © 2024 The Authors. This is an open access article under the terms of the Creative Commons Attribution License (CC-BY 4.0), which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited. |
Dates: |
|
Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > International Business Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 19 Apr 2024 13:24 |
Last Modified: | 27 Mar 2025 14:25 |
Status: | Published |
Publisher: | Wiley |
Identification Number: | 10.1111/1467-8551.12825 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:211617 |