Unilateral adoption of transfer pricing regulations may have a negative impact on real
investment by multinational corporations (MNCs). This paper uses a quasi-experimental
research design, exploiting unique panel data on domestic and multinational companies in 27
countries during 2006-2014, to find that MNC affiliates reduce their investment by over 11
percent following the introduction of transfer pricing regulations. There is no significant
reduction in total investment by the MNC group, suggesting that these investments are most
likely shifted to affiliates in other countries. The impact of transfer pricing regulations
corresponds to an increase in the ``TPR-adjusted'' corporate tax rate by almost one quarter.
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