Internal Ownership Structures of U.S. Multinational Firms
49 Pages Posted: 5 Jun 2013
Date Written: April 30, 2013
This paper is a comprehensive analysis of the foreign ownership structures of U.S. multinational firms. Though the vast majority of foreign subsidiaries are ultimately wholly-owned by their U.S. parents, the way these entities are arranged within the firms’ ownership structures varies considerably from simple to highly complex. The structures receive public attention because of their role in tax planning, but no academic study to date investigates the trade-offs involved in designing them jointly, or documents what the structures look like for typical firms. This paper begins to fill this gap. After establishing a basic taxonomy and a set of key facts about the structures, we look inside the black box of complex firms to investigate what forces drive internal ownership choices. We find evidence of several distinct tax motives, but also uncover a number of non-tax factors, including internal financing costs and expropriation risks.
Keywords: Multinationals, Ownership Structures, Taxes
JEL Classification: G32, H25
Suggested Citation: Suggested Citation