Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235512 
Year of Publication: 
2021
Series/Report no.: 
University of Tübingen Working Papers in Business and Economics No. 148
Publisher: 
University of Tübingen, Faculty of Economics and Social Sciences, Tübingen
Abstract: 
Firm integration is fundamentally shaped by contractual frictions. But do better contracting institutions, reducing these frictions, induce firms to be more or less deeply integrated? To address this question, this paper exploits unique micro data on ownership shares across more than 200,000 firm pairs worldwide, including domestic and cross-border ownership links. We uncover a new stylized fact: Firms choose higher ownership shares in subsidiaries located in countries with better contracting institutions. We develop a Property-Rights Theory of the multinational firm featuring partial ownership that rationalizes this pattern and guides our econometric analysis. The estimations demonstrate that better contracting institutions favor deeper integration, in particular in relationship-specific industries.
Subjects: 
firm integration
contracting institutions
multinational firms
Property-Rights Theory
ownership shares
JEL: 
F21
F23
D02
D23
L14
L23
Document Type: 
Working Paper

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