<p>This study investigates how institutional investors approach multinational companies (MNCs) with ties to tax havens by analyzing their ownership patterns. Leveraging quarterly holdings data from over 15,000 investors spanning 90 countries and more than 20,000 MNCs, we uncover that institutional ownership is noticeably higher for firms incorporated in tax havens compared to those merely operating subsidiaries there. Investors are especially drawn to the tax rate differential between a firm’s incorporation country and domicile country. Yet, our findings reveal that institutional investors do not overlook the importance of a robust governance framework. Institutional ownership is higher in firms in countries with stronger governance standards, suggesting a balancing of tax benefits against governance risks. We further differentiate between independent and pressure-sensitive institutional investors, reporting that independent institutions are particularly focused on maximizing tax efficiency and ensuring high governance quality, while pressure-sensitive investors exhibit less pronounced preferences. Our research highlights the nuanced trade-offs institutional investors must weigh when considering MNCs with tax haven exposure, emphasizing that both tax advantages and governance considerations play pivotal roles in shaping investment strategies. These insights deepen our understanding of global investment behavior and inform policy debates about the complex interplay between taxation, governance, and multinational corporate structure.</p>