Tax Havens and Emerging Market Multinationals: The rRle of Property Rights and Economic Freedom

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This paper investigates the relationship between home country institutional quality and EMNEs investing in tax havens. We develop a conceptual framework that adapts the institutional escapism framework, whereby EMNEs expand globally to escape institutional hazards in the home country together with the institutional leverage framework, whereby EMNEs can leverage the home institutions as a competitive advantage. This allows us to conceptually derive and explain the curvilinear (U-shaped) relationship between institutional differences and reforms over time and how this impacts on EMNE strategy towards tax havens. Based on a large cross-country firm level dataset, our empirical results confirm the curvilinear relationship, such that EMNEs from weaker institutional environments are more likely to own tax haven subsidiaries. However, as the emerging country improves it institutional environment, the likelihood of investing in tax haven declines before it increases again at a time when the emerging country has achieved a developmental stage similar to developed countries. Based on our results, we draw several managerial and policy related implications.
Original languageEnglish
JournalAcademy of Management Proceedings
Issue number1
Early online date6 Jul 2022
Publication statusPublished - 1 Aug 2022


  • General Medicine


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