Host country corporate income tax rate and foreign subsidiary survival

Bassam Farah, Rida Elias, Dwarka Chakravarty, Paul Beamish*

*Corresponding author for this work

Research output: Contribution to journalShort surveyResearchpeer-review

10 Citations (Scopus)

Abstract

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.

Original languageEnglish
Article number101186
JournalJournal of World Business
Volume56
Issue number2
DOIs
Publication statusPublished - Feb 2021
Externally publishedYes

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