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Location of Decision Rights Within Multinational Firms

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  • LESLIE A. ROBINSON
  • PHILLIP C. STOCKEN

Abstract

Using U.S.‐based multinational firm data gathered over more than two decades, we examine factors associated with the location of decision rights within these firms, whether the inappropriate assignment of decision rights is associated with poor firm performance, and whether these firms relocate decision rights in response to their evolving environments. We find that a mismatch between the location of decision rights and a firm's environment is associated with weak firm performance. We also show that the likelihood a parent company will alter the assignment of decision rights to a subsidiary is increasing in the extent of a mismatch although this likelihood is decreasing in the strength of the subsidiary's performance.

Suggested Citation

  • Leslie A. Robinson & Phillip C. Stocken, 2013. "Location of Decision Rights Within Multinational Firms," Journal of Accounting Research, Wiley Blackwell, vol. 51(5), pages 1261-1297, December.
    • Handle: RePEc:bla:joares:v:51:y:2013:i:5:p:1261-1297
    DOI: 10.1111/1475-679X.12021
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    3. Burks, Jeffrey J. & Randolph, David W. & Seida, Jim A., 2019. "Modeling and interpreting regressions with interactions," Journal of Accounting Literature, Elsevier, vol. 42(C), pages 61-79.
    4. Kim, Bosung & Park, Kun Soo, 2016. "Organizational structure of a global supply chain in the presence of a gray market: Information asymmetry and valuation difference," International Journal of Production Economics, Elsevier, vol. 175(C), pages 71-80.
    5. Kohlhase, Saskia & Wielhouwer, Jacco L., 2023. "Tax and tariff planning through transfer prices: The role of the head office and business unit," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    6. Scott D. Dyreng & Jeffrey L. Hoopes & Jaron H. Wilde, 2016. "Public Pressure and Corporate Tax Behavior," Journal of Accounting Research, Wiley Blackwell, vol. 54(1), pages 147-186, March.
    7. Romana L. Autrey & Francesco Bova & David A. Soberman, 2014. "Organizational Structure and Gray Markets," Marketing Science, INFORMS, vol. 33(6), pages 849-870, November.
    8. Yongliang Wu & Zihui Li & Min Zhang & Shengbao Zhai, 2023. "Auditor Assignments and Audit Quality," Australian Accounting Review, CPA Australia, vol. 33(2), pages 160-187, June.
    9. Ming Cai & Zhong Ma & Youhua Li, 2022. "The Effect of the Subsidiary on the Ultimate Controller’s Private Benefits: Enlightenment to the Risk Management Challenges for Sustainability of the Corporate," Sustainability, MDPI, vol. 14(8), pages 1-15, April.
    10. Barth, Andreas & Radev, Deyan, 2022. "Integration culture of global banks and the transmission of lending shocks," Journal of Banking & Finance, Elsevier, vol. 134(C).
    11. Jing Huang, 2018. "Foreign earnings management of US multinational companies: The role of decision rights," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(5), pages 552-574, July.
    12. Zero Deng, 2020. "Foreign Exchange Risk, Hedging, and Tax‐Motivated Outbound Income Shifting," Journal of Accounting Research, Wiley Blackwell, vol. 58(4), pages 953-987, September.
    13. Jing Huang & Linda Krull & Rosemarie Ziedonis, 2020. "R&D Investments and Tax Incentives: The Role of Intra‐Firm Cross‐Border Collaboration," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2523-2557, December.
    14. Zhu, Ling & Kong, Dongmin, 2022. "Does government transparency shape firm decentralization? Evidence from a natural experiment in China," Emerging Markets Review, Elsevier, vol. 53(C).
    15. Belén Gill de Albornoz Noguer & Simona Rusanescu, 2017. "Foreign ownership and financial reporting quality in private subsidiaries," Working Papers. Serie EC 2017-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    16. Cao, Yuqiang & Li, Chenglin & Liu, Xinghe & Lu, Meiting & Shan, Yaowen, 2022. "Economic policy uncertainty and debt allocation within business groups," Economic Modelling, Elsevier, vol. 116(C).
    17. Amine Tarazi & Iftekhar Hasan & Ibrahim Siraj & Qiang Wu, 2016. "Value Relevance of Earnings of Multinational Firms: Regulatory Regimes Associated with Foreign Subsidiaries," Working Papers hal-01360048, HAL.

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