Host Country Corporate Income Tax Rate and Foreign Subsidiary Survival  

Bassam Farah, Rida Elias, Dwarka Chakravarty, Paul W. Beamish

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)
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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
Number of pages10
JournalJournal of World Business
Volume56
Issue number2
Early online date11 Jan 2021
DOIs
Publication statusPublished - 28 Feb 2021

Bibliographical note

Funding Information:
This research was in part funded by the American University of Beirut (AUB) University Research Board (URB) grant 2017-18 .

Funding Information:
The authors thank Editor-in-Chief Ajai Gaur and three anonymous reviewers for their constructive comments and suggestions. We also thank Lorraine Eden for reviewing an early draft and providing us with helpful feedback. This research was in part funded by the American University of Beirut (AUB) University Research Board (URB) grant 2017-18.

Publisher Copyright:
© 2021 The Authors

Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.

Keywords

  • Corporate tax
  • Country specific advantage
  • Multinational enterprise
  • Subsidiary
  • Survival

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