The Relationship Between MNE Tax Haven Use and FDI into Developing Economies Characterized by Capital Flight

30 Pages Posted: 15 Sep 2020

See all articles by Ali Ahmed

Ali Ahmed

Newcastle University London

Chris Jones

Aston University - Aston Business School

Yama Temouri

Aston University

Date Written: August 31, 2020

Abstract

The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship between tax 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

Keywords: capital flight, economic development, institutions, tax havens, wealth extraction

Suggested Citation

Ahmed, Ali and Jones, Chris and Temouri, Yama, The Relationship Between MNE Tax Haven Use and FDI into Developing Economies Characterized by Capital Flight (August 31, 2020). Transnational Corporations Journal, Vol. 27, No. 2, 2020, Available at SSRN: https://ssrn.com/abstract=3692289

Ali Ahmed

Newcastle University London ( email )

5 Barrack Road
Devonshire Building
NEWCASTLE UPON TYNE, NE1 7RU
United Kingdom

Chris Jones (Contact Author)

Aston University - Aston Business School

Aston Triangle
Birmingham, B47ET
United Kingdom

Yama Temouri

Aston University ( email )

Aston Triangle
Birmingham, B4 7ET
United Kingdom

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