IPOs and Foreign Tax Structures
Abstract
Does going public affect the amount and type of corporate international tax planning? Using a panel of U.S. corporate tax return data from 2004 to 2018, we show that IPO completion is associated with the rapid implementation of multinational foreign tax structures. Specifically, within three years after filing for an IPO, firms (1) expand their presence in low-tax jurisdictions, (2) enter into cross-border agreements that accompany intangible asset transfers to foreign subsidiaries, and (3) increase the likelihood and level of foreign related-party income-shifting payments. Effects are strongest among firms with strong capital market pressure to hit post-IPO earnings targets, firms with high R&D spending pre-IPO, and firms with limited ability to use net operating loss carryforwards. We contribute to the nascent literature studying tax implications of IPOs by documenting the types and timing of specific tax strategies that enable public firms to remain lightly taxed in the post-IPO period.
- DOI
- 10.2308/tar-2024-0048
- Pages
- 1-32
- Language
- en
- Sources
- crossref