Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications

dc.contributorAalto-yliopistofi
dc.contributorAalto Universityen
dc.contributor.authorKarhunen, Päivien_US
dc.contributor.authorLedyaeva, Svetlanaen_US
dc.contributor.authorBrouthers, Keith D.en_US
dc.contributor.departmentCenter for Markets in Transition (CEMAT)en
dc.contributor.departmentDepartment of Economicsen
dc.contributor.organizationKing's College Londonen_US
dc.date.accessioned2021-08-25T06:54:24Z
dc.date.available2021-08-25T06:54:24Z
dc.date.issued2022-11en_US
dc.descriptionPublisher Copyright: © 2021, The Author(s).
dc.description.abstractForeign 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.en
dc.description.versionPeer revieweden
dc.format.mimetypeapplication/pdfen_US
dc.identifier.citationKarhunen, P, Ledyaeva, S & Brouthers, K D 2022, ' Capital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implications ', Journal of Business Ethics, vol. 181, no. 1, pp. 117–137 . https://doi.org/10.1007/s10551-021-04908-yen
dc.identifier.doi10.1007/s10551-021-04908-yen_US
dc.identifier.issn0167-4544
dc.identifier.otherPURE UUID: d2796510-c1c5-4c88-8574-43ca8cfac1d2en_US
dc.identifier.otherPURE ITEMURL: https://research.aalto.fi/en/publications/d2796510-c1c5-4c88-8574-43ca8cfac1d2en_US
dc.identifier.otherPURE LINK: http://www.scopus.com/inward/record.url?scp=85112295203&partnerID=8YFLogxKen_US
dc.identifier.otherPURE FILEURL: https://research.aalto.fi/files/66810209/Karhunen2021_Article_CapitalRound_TrippingDetermina.pdfen_US
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/109183
dc.identifier.urnURN:NBN:fi:aalto-202108258420
dc.language.isoenen
dc.publisherSpringer Netherlands
dc.relation.ispartofseriesJournal of Business Ethicsen
dc.rightsopenAccessen
dc.subject.keywordEmerging market firmsen_US
dc.subject.keywordEthicsen_US
dc.subject.keywordInstitutional arbitrageen_US
dc.subject.keywordOffshore financial centersen_US
dc.subject.keywordRound-trip investmenten_US
dc.subject.keywordRussiaen_US
dc.titleCapital Round-Tripping: Determinants of Emerging Market Firm Investments into Offshore Financial Centers and Their Ethical Implicationsen
dc.typeA1 Alkuperäisartikkeli tieteellisessä aikakauslehdessäfi
dc.type.versionpublishedVersion

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