Mihir A. Desai

18 Results

 

Should Pay-for-Performance Compensation be Replaced?

Summing up: In spite of its naysayers, pay for performance compensation still makes sense to most of us, according to those responding to Jim Heskett's column on the subject. But there is a difference of opinion of about when and how it works and how it should be structured. Open for comment; 24 Comments posted.

Trade Credit and Taxes

Mihir A. Desai, C. Fritz Foley, James R. Hines, and Jr.

Economists have extensively analyzed the effects of taxation on many aspects of corporate financial policy, including borrowing and dividend distributions. But the effects of corporate income taxes on trade credit practices have been much less understood. Research by Mihir A. Desai, C. Fritz Foley, and James R. Hines, Jr. develops the idea that trade credit allows firms to reallocate capital in response to tax differences. Using detailed data on the foreign affiliates of US multinational firms, the authors are able to observe affiliates of the same firm operating in different countries and therefore facing different corporate income tax rates. Taken together, the findings illustrate that firms use trade credit to reallocate capital from low-tax jurisdictions to high tax jurisdictions to capitalize on tax-induced differences in pretax marginal products of capital. Their actions imply that tax rate differences across countries significantly affect capital allocation within firms, depressing investment levels in high tax jurisdictions and introducing differences between the productivity of capital deployed in different locations. Read More

Tax Policy and the Efficiency of US Direct Investment Abroad

Mihir A. Desai, C. Fritz Foley, and James R. Hines Jr.

The tax policy toward multinational firms has come under increased scrutiny with the rise of global activities of firms and concerns that these activities displace activities at home. This scrutiny has raised the question of whether current tax policy inefficiently subsidizes the foreign activities of firms. Mihir A. Desai, C. Fritz Foley, and James R. Hines, Jr. consider this claim by applying the theory of dynamic efficiency to the activities of multinational firms. Specifically, by comparing direct investment abroad with repatriated investment returns over the last sixty years, they conclude that firms are not investing to dynamically inefficient levels, suggesting that current tax policy is not an inefficient subsidy. Read More

Tax US Companies to Spur Spending

With traditional monetary and fiscal policy instruments to stimulate the economy seemingly exhausted, professor Mihir Desai offers a radical proposal: Use taxes to motivate corporations to spend a trillion dollars in cash. Open for comment; 9 Comments posted.

Securing Jobs or the New Protectionism? Taxing the Overseas Activities of Multinational Firms

Mihir A. Desai

Popular imagination often links two significant economic developments: the rapid escalation of the foreign activities of American multinational firms over the last 15 years, and rising levels of economic insecurity, particularly among workers in certain sectors. The presumed linkages between these phenomena have led many to call for a reconsideration of the tax treatment of foreign investment. Increasing the tax burden on outbound investment by American multinational firms, it is claimed, offers the promise of alleviating domestic employment losses and insecurity while also raising considerable revenue. HBS professor Mihir A. Desai looks beneath the trends, examining the economic determinants of outbound investment decisions and synthesizing what is known about the relationship between domestic and foreign activities. Read More

Where is Home for the Global Firm?

Mihir A. Desai

Global markets are changing the relationship between firms and nation-states in important ways, says HBS professor Mihir A. Desai. His new working paper, "The Decentering of the Global Firm," offers a practical framework for business leaders to think strategically about where to locate their company's financial and legal homes, and managerial talent. Q&A with Desai. Read More

The Decentering of the Global Firm

Mihir A. Desai

Firms such as Caterpillar are typically considered American companies by virtue of history while Honda, for example, is regarded as a Japanese company. However, the archetypal multinational firm with a particular national identity and a corporate headquarters fixed in one country is becoming obsolete as firms continue to maximize the opportunities created by global markets. The defining characteristics of what makes a firm belong to a country—where it is incorporated, where it is listed, the nationality of its investor base, the location of its headquarters functions—are no longer bound to one country. Why are these changes taking place, and what are their consequences? This paper places the increasing mobility of corporate identities within the broader setting of transformations to the "shape" of global firms over the last half century. Read More

Why the U.S. Should Encourage FDI

American financial executives are courting foreign direct investors, particularly sovereign wealth funds, for new investments. Should these investments draw increased scrutiny from U.S. regulators? Harvard Business School professor Mihir Desai argues that most of these deals work out in America's best financial interest. Read More

The Debate over Taxing Foreign Profits

Mihir A. Desai

Corporate tax policy has suddenly become a hot topic in the U.S., including the issue of whether current tax laws encourage American firms to outsource jobs to other countries. Harvard Business School professor Mihir Desai makes a case for exempting foreign profit from taxes if proper safeguards are put in place. Read More

Leveling the Executive Options Playing Field

Harvard Business School professor Mihir A. Desai recently presented testimony to a U.S. Senate subcommittee looking at the subject of executive stock options. His theme: A "dual-reporting system" makes it difficult for investors and tax authorities to learn the real numbers. Read More

Investors Hurt by Dual-Track Tax Reporting

What corporations report in profit to the IRS and what they report to shareholders are often two different numbers—sometimes wildly so. That's why the IRS and Securities and Exchange Commission are proposing that companies publicly report taxes paid—and Professor Mihir Desai thinks this is only a first step. Read More

Fixing Executive Options: The Veil of Ignorance

Who says you can't rewrite history? Dozens of companies have been caught in the practice of backdating options for top executives. But this is only part of the problem with C-level compensation packages, which often motivate top executives to act in their own best interests rather than those of shareholders. Professors Mihir Desai and Joshua Margolis turn to philosopher John Rawls for a solution: Reward the execs, but don't give them the details. Read More

Investor Protection: The Czech Experience

Mihir A. Desai

When TV Nova launched as the first private television channel in post-communist Czechoslovakia, few anticipated the business drama behind the scenes. HBS professor Mihir Desai explains what managers can learn from one unlucky investor's experience. Read More

The Competitive Advantage of Global Finance

Mihir A. Desai

Relatively few multinational companies truly understand or take advantage of international finance. Professor Mihir A. Desai tackles the subject in a new book, International Finance: A Casebook. Here’s a Q&A. Read More

Time to Rethink the Corporate Tax System?

Mihir A. Desai

Corporations have turned tax obligations into profit centers, bringing into question the whole rationale for business taxes in the first place. Professor Mihir A. Desai discusses problems with the modern corporate tax structure and suggests possible remedies. Read More

Rethink the Value of Joint Ventures

Mihir A. Desai

Why are joint ventures losing favor with transnational companies? Professor Mihir A. Desai discusses research that suggests globalization makes go-it-alone strategies pay off. Read More

Studying Japan from the Inside

Mihir A. Desai and Tarun Khanna

What comes next for Japan’s economy? Masako Egawa, executive director of Harvard Business School’s Japan Research Office, sees a period of fundamental change ahead. Read More

MNCs in Asia: Investing in the Future

To be a major global player, you have to participate in Asia. But challenges facing multinationals as they take part in this market range from currency devaluation to ever-changing government regulations. Read More