2019
DOI: 10.24136/eq.2019.013
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Assessing impact of base erosion and profit shifting on performance of subsidiaries of multinational corporations in Baltic countries

Abstract: Research background: The problem of base erosion and profit shifting by multi-national corporations has been debated from different perspectives because of its multiple impact on the key actors in the economy. Studies refer to its positive impact on companies via corporate taxes saved, but its negative impact on governments via reduced tax collection. A number of empirical studies conducted in different countries support the substantial BEPS impact on company performance, but report differences in its magnitud… Show more

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Cited by 5 publications
(7 citation statements)
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References 22 publications
(47 reference statements)
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“…Based on median values, 10% increase in difference of statutory tax rates between host and parent countries explains 1.26 times higher pre-tax earnings of multinational subsidiary in Lithuania. This is in line with our previous research [5]. Estimated impact remained robust across few tax variable specifications.…”
Section: Discussionsupporting
confidence: 92%
“…Based on median values, 10% increase in difference of statutory tax rates between host and parent countries explains 1.26 times higher pre-tax earnings of multinational subsidiary in Lithuania. This is in line with our previous research [5]. Estimated impact remained robust across few tax variable specifications.…”
Section: Discussionsupporting
confidence: 92%
“…In this study, the indirect method was based on Hines and Rice (1994), as firm-level information on intra-firm transfer prices for Lithuanian companies was unavailable. The current study continues our previous research of corporate tax avoidance in Lithuania (Kundelis & Legenzova, 2019;Kundelis et al, 2021). Our study is in line with Nicolay et al (2017), who was one of the first to construct an empirical study employing two empirical models: profit shifting via transfer pricing manipulation and debt shifting to test the substitution between those two channels.…”
Section: Introductionsupporting
confidence: 75%
“…Empirical studies also demonstrate that MNEs and their subsidiaries use transfer pricing manipulation to shift profits within a group from high-tax to low-tax countries (Clausing, 2003). As discussed in our previous research (Kundelis & Legenzova, 2019), empirical studies (Hines & Rice,1994;Huizinga et al, 2008;Lohse & Riedel, 2013;Dischinger et al, 2014;Casillo-Murciego & López-Laborda;2017;de Mooij & Liu, 2020, etc. ) found evidence of the significant yet varying in its scope impact of tax differentials on company's debt shifting and transfer mispricing activities.…”
Section: Introductionmentioning
confidence: 77%
See 1 more Smart Citation
“…Four models are employed to estimate the level of discretional accruals and real earnings management. [18] assess the impact of base erosion and profit shifting on multinational corporations' subsidiaries' performance in the Baltic countries. [19] examine the impact of multiple block holders on earnings management when the main conflict of interest is between controlling shareholder and other shareholders.…”
Section: Literature Reviewmentioning
confidence: 99%