Previous theoretical studies on the debt shifting behavior of multinationals have assumed affiliates of multinationals to be wholly owned. We develop a model that allows a multinational firm to determine both the leverage and ownership structure in affiliates endogenously. A main finding is that...

Recent years have seen the introduction of profit comparisons by national tax authorities to cope with multinationals' profit shifting activities. The authors argue that a country that switches from price-related transfer pricing rules to profit-related measures can reduce imports without...