Host country corporate income tax rate and foreign subsidiary survival

Host country tax considerations are critical to multinational enterprise (MNE) foreign direct investment decisions, but understudied in international business (IB) research. We address this gap by examining the relationship between host country corporate income tax rates (HCCITRs) and foreign subsid...

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Bibliographic Details
Published in:Journal of world business : JWB 2021-02, Vol.56 (2), p.101186, Article 101186
Main Authors: Farah, Bassam, Elias, Rida, Chakravarty, Dwarka, Beamish, Paul
Format: Article
Language:English
Subjects:
Analysis
Business schools
Corporate income taxes
Corporate tax
Country specific advantage
Foreign investments
International business enterprises
Multinational enterprise
Subsidiary
Survival
Tax law
Tax rates
Taxation
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Summary:Host country tax considerations are critical to multinational enterprise (MNE) foreign direct investment decisions, but understudied in international business (IB) research. We address this gap by examining the relationship between host country corporate income tax rates (HCCITRs) and foreign subsidiary survival. We develop our hypothesis drawing upon location/country-specific advantage theory and international tax literature. Our longitudinal sample (1990–2013) comprises 13,468 MNE subsidiaries in 78 countries. Results indicate a one standard deviation (7.7 %) decrease in HCCITR increases subsidiary survival probability (at any given time) by 33 %. This effect is stronger compared to several well studied explanatory variables in IB survival analysis.
ISSN:1090-9516
DOI:10.1016/j.jwb.2020.101186