The Blurring of Corporate Investor Nationality and Complex Ownership Structures

Abstract

Recent years have seen a significant increase in complexity of multinational enterprises (MNEs) ownership structures. Complex corporate structures raise concerns on the effectiveness of national and international investment policies, based on the notion of investors' nationality. This motivates this research effort aimed at analysing the ownership structures of some 700 thousand foreign affiliates (FAs). A new methodology, the bottom-up approach, is introduced. The main objective is to empirically map the "shareholder space" of FAs, along the vertical dimension, from the direct shareholders to the ultimate owners. We find that FAs are often part of transnational investment chains; more than 40% of foreign affiliates have direct and ultimate shareholders in different jurisdictions ("double or multiple passports"). Based on shareholders' nationality, we then propose and empirically analyse the salient features of four main archetypes of FAs ownership structure: plain foreign, conduit structures, round-tripping and domestic hubs. Each poses specific challenges to the policy-maker.

Keywords: multinational enterprises, ownership structures, firm-level, investors' nationality

JEL Classification: F23, G32, H87