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Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications
Journal of Business Ethics ( IF 6.331 ) Pub Date : 2021-08-11 , DOI: 10.1007/s10551-021-04908-y
Päivi Karhunen 1 , Svetlana Ledyaeva 1 , Keith D. Brouthers 2
Affiliation  

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.



中文翻译:

资本往返:新兴市场公司投资离岸金融中心的决定因素及其伦理影响

离岸金融中心 (OFC) 的外国直接投资 (FDI) 在商业道德研究中越来越受到关注。大部分研究倾向于将 OFC 视为公司可以避税的地方,认为这种行为是不道德的。然而,缺乏对新兴市场公司资本往返的研究,这是这一现象的一个组成部分。这种往返涉及公司将资金汇入 OFC,然后以“外国”投资为幌子将其投资回母国。目前,关于这种往返 FDI 活动的伦理影响的讨论很少。在本文中,我们将往返概念化为机构套利,并着眼于对 OFC 进行此类投资的决定因素和道德影响。探索俄罗斯的往返交易我们注意到,公司倾向于将更多资金投资于提供税收和保密或保密和产权保护套利机会相结合的 OFC。在任何一种情况下,公司都会利用 OFC 和俄罗斯之间的制度差异提供的机会,同时对俄罗斯进行投资。我们的结果往往表明,将 OFC 投资等同于避税,从而将其视为不道德行为,这种解释在新兴经济往返的情况下过于狭隘。这是因为此类投资往往受到母国利益相关者不道德行为的推动,实际上可能会为社会带来好处。在任何一种情况下,公司都会利用 OFC 和俄罗斯之间的制度差异提供的机会,同时对俄罗斯进行投资。我们的结果往往表明,将 OFC 投资等同于避税,从而将其视为不道德行为,这种解释在新兴经济往返的情况下过于狭隘。这是因为此类投资往往受到母国利益相关者不道德行为的推动,实际上可能会为社会带来好处。在任何一种情况下,公司都会利用 OFC 和俄罗斯之间的制度差异提供的机会,同时对俄罗斯进行投资。我们的结果往往表明,将 OFC 投资等同于避税,从而将其视为不道德行为,这种解释在新兴经济往返的情况下过于狭隘。这是因为此类投资往往受到母国利益相关者不道德行为的推动,实际上可能会为社会带来好处。

更新日期:2021-08-11
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