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dc.contributor.authorDe Simone, Lisa
dc.contributor.authorKlassen, Kenneth
dc.contributor.authorSeidman, Jeri K. 19:33:35 (GMT) 19:33:35 (GMT)
dc.description.abstractIncome shifting from high-tax to low-tax jurisdictions is considered a primary method of reducing worldwide tax burdens of multinational firms. Current losses also affect income shifting incentives. We extend prior approaches by explicitly considering unprofitable affiliates and test whether the association between losses and tax incentives for unprofitable affiliates deviates from the negative association observed in profitable affiliates. Results suggest that multinational firms alter the distribution of reported profits to take advantage of losses. Our point estimate for profitable affiliates implies that an increase of one standard deviation in the tax incentive, C, of an affiliate with an average return on assets of 13.3 is associated with a lower return on assets of 0.5 percentage points. The same change in tax incentive of an unprofitable affiliate is associated with an increase in its return on assets of approximately 0.7 percentage points, holding assets, labor, productivity, and other factors constant. We further document a larger responsiveness to tax incentives between profitable and unprofitable affiliates in high-tax jurisdictions, consistent with predictions.en
dc.description.sponsorshipMcCombs Research Excellence Fund || McCombs Supply Chain Management Center of Excellence || Social Sciences and Humanities Research Council of Canadaen
dc.publisherAmerican Accounting Associationen
dc.subjecttransfer pricingen
dc.subjectincome shiftingen
dc.titleUnprofitable Affiliates and Income Shifting Behavioren
dcterms.bibliographicCitationLisa De Simone, Kenneth J. Klassen, and Jeri K. Seidman (2017) Unprofitable Affiliates and Income Shifting Behavior. The Accounting Review: May 2017, Vol. 92, No. 3, pp. 113-136.en
uws.contributor.affiliation1Faculty of Artsen
uws.contributor.affiliation2School of Accountancyen

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