Political Status and Tax Haven Investment of Emerging Market Firms: Evidence from China

Deng, Ziliang; Yan, Jiayan; Sun, Pei

doi:10.1007/s10551-018-4090-0

Cited by 30 publications

(28 citation statements)

References 73 publications

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“…Xia, Ma, Lu, and Yiu ( 2014 ) find that state ownership can dampen this escape pressure by enhancing local firms’ power and resources. Similarly, China-based FDI flows to international tax havens (a form of institutional escape or arbitrage) is found to be most prevalent for private firms lacking domestic political capital, but least for central SOEs (Deng, Yan, & Sun, 2020 ). However, studying state-owned R&D entities in India, Choudhury and Khanna ( 2014 ) explore SOEs’ motives in seeking resource independence and autonomy from other state actors through globalization.…”

Section: Charting the Influence Of Nonmarket Strategy Research: Analytical Framework Citation Analyses And Critical Assessmentmentioning

confidence: 99%

Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research

et al. 2021

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Multinational enterprises are deeply engaged in nonmarket strategy (NMS), including both corporate political activity (CPA) and strategic corporate social responsibility (SCSR). In this review, we document the multinational NMS research according to contributions’ theme, method, context, theory, and level of analysis. We then develop an institutional multiplicity framework to organize our analysis of this large and fragmented body of literature. In so doing, we identify the most impactful contributions within three major themes – multinational CPA, multinational SCSR, and the integration of CPA and SCSR – and their respective subthemes, and call attention to limitations in the extant research. We also highlight promising avenues for future research, including expanding the scope of NMS to incorporate microfoundations research, integrating macrolevel scholarship on global institutions, placing greater attention on the interaction between CPA and SCSR, and incorporating multi-actor global issues and movements. Our review underscores the growing importance and missed opportunities of NMS research in the international business field.

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Section: Charting the Influence Of Nonmarket Strategy Research: Analytical Framework Citation Analyses And Critical Assessmentmentioning

confidence: 99%

Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research

et al. 2021

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“…In this paper, we contend that round-trip investment in OFCs is a unique form of FDI and therefore needs better theorization to move beyond the black-and-white mindset on tax haven investment (Deng et al 2019). We concur with Su and Tan (2018) that in the emerging economy context roundtripping may be a strategic decision as much as an ethical decision-a response to unethically behaving home country institutional constituents' demands.…”

Section: Discussionmentioning

confidence: 99%

“…Finally, our paper contributes to the ongoing debate on the ethical dimension of OFC investments (Kanagaretnam et al, 2018;Su & Tan, 2018;Deng et al 2019) by focusing on the OFC characteristics that attract investors from an emerging economy to use them for capital round-tripping. On one hand, we suggest and find that part of Russia's capital round-tripping serves unethical purposes such as tax avoidance or money laundering.…”

Section: Discussionmentioning

confidence: 99%

“…Recently, researchers have started to explicitly acknowledge the role of the (home country) institutional context as a trigger for OFC investment, and extended the analysis to emerging economies (Su & Tan, 2018;Deng et al, 2019) that have "weak institutional environments with substantial government intervention and ineffective market-supporting institutions" (Su & Tan, 2018, p.1067). These studies focus on the relationship between the firm's embeddedness in its home country institutional environment and OFC investment, conceptualizing it as prosocial orientation (Su & Tan, 2018) or political status (Deng et al, 2019) of the firm. Yet, both these studies continue to conceptualize OFCs as tax havens, albeit mentioning other potential motivations, including hiding illegal conduct such as bribery (Su & Tan, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications

2021

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Foreign direct investment (FDI) in offshore financial centers (OFCs) is gaining increased attention in business ethics research. Much of this research tends to focus on OFCs as locations where firms can avoid taxes, considering such behavior as unethical. Yet, there is dearth of studies on capital round-tripping by emerging market firms, which is an integral part of this phenomenon. Such round-tripping involves firms sending capital into OFCs only to invest it back in the home country under the guise of “foreign” investment. Presently there is little discussion of the ethical implications of such round-trip FDI activities. In this paper, we conceptualize round-tripping as institutional arbitrage and look at the determinants and ethical implications of such investments into OFCs. Exploring Russian round-tripping we note that firms tend to invest more funds in OFCs that offer a combination of tax and secrecy, or secrecy and property rights protection arbitrage opportunities. In either case firms exploit the opportunities provided by institutional differences between the OFC and Russia while investing back into Russia. Our results tend to indicate that equating OFC investment to tax avoidance and thus deeming it as unethical behavior is too narrow an explanation in the case of emerging economy round-tripping. This is because such investments are often motivated by the unethical behavior of home country stakeholders and may in fact provide benefits to society.

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“…Relative to networking with market actors that may spread out geographically, political networking is more affected by a firm's location since most regulatory/administrative authorities are located in the place of the firm's operation. While prior research has long recognized the role of subnational regions in shaping firm strategies/outcomes, most of these studies in the Chinese context focused on provincial contingencies (e.g., Deng, Yan, & Sun, 2020; Shi, Sun, & Peng, 2012; Sun, Qu, & Liao, 2018; Zhang et al, 2016a). In this article, we identify a firm's most proximate locational factor – business development zones – to see if and how business-government relations can be restructured in the zones.…”

Section: Theoretical Background and Hypotheses Developmentmentioning

confidence: 99%

Wining and Dining Government Officials: What Drives Political Networking in Chinese Private Ventures?

2020

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Managerial networking with political actors has long been recognized as a crucial co-option strategy to navigate the challenging institutional environment in emerging economies. However, we know much less about what drives the variation of political networking investment by private ventures. Drawing on resource dependence theory, we unpack the dyadic business-government relations and identify the key organizational and environmental factors that shape the power dependence relationships between private ventures and the government. By examining power imbalance and mutual dependence in this dyadic relationship and considering both the necessity and the capability of political networking, we develop hypotheses regarding the ways in which size-, connection-, and location-based dependencies affect firms’ political networking intensity. These hypotheses are tested through a unique survey of Chinese private ventures. Our study finds that political networking intensity (1) has an inverted U-shaped relationship with firm size, (2) is negatively associated with the presence of embedded political ties while positively associated with that of achieved political connections, and (3) is smaller when the focal firm is located in business development zones. This research bears rich implications for our understanding of corporate political activity in emerging economies from a resource dependence lens.

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Political Status and Tax Haven Investment of Emerging Market Firms: Evidence from China

Cited by 30 publications

References 73 publications

Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research

Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research

Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications

Wining and Dining Government Officials: What Drives Political Networking in Chinese Private Ventures?

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