The Effect of Repatriation Tax Costs on U.S. Multinational Investment

This paper investigates whether the U.S. repatriation tax for U.S. multinational corporations affects foreign investment. Our results show that the locked-out cash due to repatriation tax costs is associated with a higher likelihood of foreign (but not domestic) acquisitions. We also find a negative association between tax-induced foreign cash holdings and the market reaction to foreign deals. This result suggests that the investment activity of firms with high repatriation tax costs is viewed by the market as less value-enhancing than that of firms with low tax costs, consistent with foreign investment of firms with high repatriation tax costs possibly reflecting agency-driven behavior.

• Publication year

  2015

• Venue

  Journal of Financial Economics

• Publication date

  2015-04-01

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.1016/J.JFINECO.2014.12.004
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

• Trapped Cash and the Profitability of Foreign Acquisitions

  2016cited by this paper
• Management Forecast Quality and Capital Investment Decisions

  2014cited by this paper
• Patent Laws, Product Life-Cycle Lengths, and Multinational Activity

  2014cited by this paper
• Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act

  2012cited by this paper
• Is U . S . Multinational Dividend Repatriation Policy Influenced by Reporting Incentives ?

  2012cited by this paper
• Watch What I Do, Not What I Say: the Unintended Consequences of the Homeland Investment Act

  2011cited by this paper
• Bringing it Home: A Study of the Incentives Surrounding the Repatriation of Foreign Earnings Under the American Jobs Creation Act of 2004

  2009cited by this paper
• Microeconometrics Using Stata

  2009cited by this paper
• Why Do U.S. Firms Hold So Much More Cash Than They Used To

  2009cited by this paper
• Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on U.S. Multinational Firms' Tax Rates

  2009cited by this paper
• Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction

  2008cited by this paper
• Why Do Firms Hold So Much Cash? A Tax-Based Explanation

  2007influential reference
• Corporate Governance and Acquirer Returns

  2007influential reference
• Agency Problems of Excess Endowment Holdings in Not-for-Profit Firms

  2006cited by this paper
• Microeconometrics: Maximum Likelihood and Nonlinear Least-Squares Estimation

  2005cited by this paper
• Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

  2005cited by this paper
• Firm size and the gains from acquisitions

  2004cited by this paper
• Taxes and Business Strategy: A Planning Approach

  2001cited by this paper
• Corporate Cash Reserves and Acquisitions

  1999influential reference
• Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers

  1999cited by this paper
• The determinants and implications of corporate cash holdings

  1999cited by this paper
• Location and the multinational enterprise: A neglected factor?

  1998influential reference
• Do Managerial Objectives Drive Bad Acquisitions

  1990cited by this paper
• Tax Policy and Foreign Direct Investment

  1981influential reference
• Principles of reform

  year unknowncited by this paper

• Earnings Repatriation Tax Cost Risks and Bank Loan Contracting

  2026cites this paper
• Foreign Tax Holiday Participation and US Job and Investment Loss

  2026cites this paper
• Firms’ real and reporting responses to taxation: A review

  2025cites this paper
• The effects of multinationality on the market value of cash: Evidence from Latin America

  2025cites this paper
• Reassessing the Effects of Corporate Income Taxes on Mergers and Acquisitions Using Empirical Advances in the Gravity Literature

  2025cites this paper
• Investors’ assessment of cross-border M&A – what drives announcement returns post-TCJA?

  2025cites this paper
• How do multinational companies respond to destination-based consumption taxes?

  2025cites this paper
• The Outsized Role of Tax Havens in Mergers and Acquisitions

  2025cites this paper
• U.S. multinationals’ foreign cash holdings: an empirical estimate and the impact of the tax cuts and jobs act of 2017 on the value of foreign cash

  2025cites this paper
• Exposure to Corruption and Stock Returns for US Multinational Firms: Evidence From Africa

  2025cites this paper
• Strategic income shifting in uncertain times: Insights from economic policy uncertainty

  2025cites this paper
• The real and financial effects of internal liquidity: Evidence from the Tax Cuts and Jobs Act

  2025cites this paper
• Endogeneity and the economic consequences of tax avoidance

  2025cites this paper
• The consequences of the 2017 US international tax reform: a survey of the evidence

  2024cites this paper
• U.S. multinational corporations' income shifting incentives and share repurchases: Evidence across differential taxation systems

  2024cites this paper
• Cross‐border regulatory cooperation and corporate tax avoidance

  2024cites this paper
• Cash Flow Unchained: Does the Tax Cuts and Jobs Act make U.S. multinational corporations more vulnerable to collective bargaining power?

  2024cites this paper
• Corporate inversion, cost of equity and ineffective tax reform

  2024cites this paper
• Tax Avoidance with DeFi Lending

  2024cites this paper
• Financing Payouts

  2024cites this paper
• Does the mandatory disclosure of suppliers' tax uncertainties affect supply chain relations?

  2024cites this paper
• Non-arm's-length transactions, offshore financial centres, transfer pricing agreements and corporate cash holdings: Evidence from U.S. multinational corporations

  2024cites this paper
• The role of options markets in corporate social responsibility

  2024cites this paper
• Options Trading, Managerial Risk-taking, and Brand Development*

  2024cites this paper
• U.S. multinationals' alternatives to paying taxes

  2024cites this paper
• Estimating Round‐Tripping FDI from Firm‐Level Data in China

  2024cites this paper
• IPOs and Foreign Tax Structures

  2024cites this paper
• Tax Policy Expectations and Investment

  2024cites this paper
• VAT credit refunds and firm productivity: Evidence from China's VAT reform

  2024cites this paper
• “Just BEAT it” do firms reclassify costs to avoid the base erosion and anti-abuse tax (BEAT) of the TCJA?

  2023cites this paper
• The initial effect of U.S. tax reform on foreign acquisitions

  2023influential citation
• The Impact of Company Dimensions and Marketing Strategy on Tax Avoidance Practices: Empirical Study of Mining Sector Manufacturing Companies

  2023cites this paper
• The Real and Financial Effects of Internal Liquidity: Evidence From the Tax Cuts and Jobs Act

  2023cites this paper
• SPACs and Tax: Market Implications of Tax-Disadvantaged SPAC Acquisitions

  2023cites this paper
• Tax Avoidance and Multinational Firm Behavior

  2023cites this paper
• The effect of US tax reform on the taxation of US firms' domestic and foreign earnings †

  2023cites this paper
• Managerial risk-taking incentives and cash holding in U.S. firms: Evidence from FAS 123R

  2022cites this paper
• Foreign competitive pressure and inversions by U.S. multinational enterprises

  2022cites this paper
• Havenly acquisitions

  2022cites this paper
• Chicago Unbound Chicago Unbound The Consequences of the TCJA's International Provisions: The Consequences of the TCJA's International Provisions: Lessons from Existing Research Lessons from Existing Research

  2022cites this paper
• IPOs and Corporate Tax Planning

  2022cites this paper
• CEO Overconfidence and IRS Attention

  2022cites this paper
• The persistence and pricing of changes in multinational firms’ foreign cash holdings

  2022influential citation
• The Consequences of the TCJA’s International Provisions: A Conceptual Framework and Survey of the Evidence

  2022cites this paper
• Intersecting Dimensions: Qualitative Investigation Into Financial Performance, Firm Valuation, Tax Compliance, Corporate Governance, And Leadership Dynamics

  2022cites this paper
• Strategic Decision Making of Top Management: Earnings Management and Corporate Acquisitions

  2022cites this paper
• Foreign Earnings Repatriations and Domestic Employment

  2021cites this paper
• The Effect of Income-Shifting Aggressiveness on Corporate Investment

  2021cites this paper
• Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings

  2021cites this paper
• Announcing the Repatriation of Indefinitely Reinvested Earnings

  2021cites this paper
• Temperature and trading behaviours

  2021cites this paper
• A Review of Cross-Border Merger and Acquisition Research

  2021influential citation
• The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis

  2021cites this paper
• Do bondholders incorporate expected repatriation taxes into their pricing of debt?

  2021influential citation
• Monitoring or payroll maximization? What happens when workers enter the boardroom?

  2021cites this paper
• Do Foreign Cash Holdings Generate Uncertainty for Analysts?

  2021influential citation
• Distracted institutional shareholders and corporate cash holdings

  2021cites this paper
• Where to Find Value on the Balance Sheet

  2021cites this paper
• Do U.S. firms disguise acquisitions to avoid taxes?

  2021influential citation
• Real Effects of Tax Uncertainty: Evidence from Firm Capital Investments

  2021cites this paper
• Do multinational firms respond to personal dividend income tax rates?

  2021cites this paper
• Taking Advantage of Employer Tax Incentives for Workplace Diversity

  2021cites this paper
• M&As and political uncertainty: Evidence from the 2016 US presidential election

  2021cites this paper
• U.S. Multinationals’ Alternatives to Repatriation

  2021cites this paper
• The consequences of deviating from financial reporting industry norms: Evidence from the disclosure of foreign cash

  2020cites this paper
• The Impact of IP Box Regimes on the M&A Market

  2020cites this paper
• The Impact of U.S. Tax Reform on U.S. Firm Acquisitions of Domestic and Foreign Targets.

  2020influential citation
• Foreign Exchange Risk, Hedging, and Tax‐Motivated Outbound Income Shifting

  2020cites this paper
• The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?

  2020cites this paper
• Tax Avoidance through Cross-Border Mergers and Acquisitions

  2020cites this paper
• An Overview of Academic Tax Accounting Research Drawing on U.S. Multinational Taxation

  2020cites this paper
• Loss or Lost? Economic Consequences of Internal Capital Markets in Business Groups

  2020cites this paper
• How Do Reductions in Foreign Country Corporate Tax Rates Affect U.S. Domestic Manufacturing Firms?

  2020cites this paper
• Taxing away M&A: Capital gains taxation and acquisition activity

  2020cites this paper
• Repatriation Taxes, Internal Agency Conflicts, and Subsidiary-Level Investment Efficiency

  2020influential citation
• The Role of Taxes in the Disconnect between Corporate Performance and Economic Growth

  2020cites this paper
• Does the use of tax haven subsidiaries by U.S. multinational corporations affect the cost of bank loans?

  2020cites this paper
• Do the most prominent firms really make the worst deals? How selection issues affect inferences from M&A studies

  2020cites this paper
• The alignment between reported profits and real activity in times of the BEPS Action Plan

  2020cites this paper
• Corporate tax cuts, merger activity, and shareholder wealth

  2020cites this paper
• THE ROLES OF ECONOMIC POLICY UNCERTAINTY AND THE COVID-19 PANDEMIC IN THE CORRELATION BETWEEN CRYPTOCURRENCY AND STOCK MARKETS

  2020cites this paper
• The Role of Taxes in the Disconnect Between Corporate Performance and Economic Growth

  2020cites this paper
• Strategic Subsidiary Disclosure

  2020cites this paper
• The Effect of the 2017 U.S. Tax Reform on U.S. Acquisitions of Foreign Firms

  2020influential citation
• The role of accounting quality in corporate liquidity management

  2020cites this paper
• The Use of Tax Accruals to Fool the Market: The Case of PRE before the Tax Cuts and Jobs Act

  2020cites this paper
• Corporate Inversions and Governance

  2020cites this paper
• Made in the U.S.A.? A Study of Firm Responses to Domestic Production Incentives

  2019cites this paper
• A FESTSCHRIFT IN HONOR OF HARRY GRUBERT

  2019cites this paper
• Using IRS data to identify income shifting to foreign affiliates

  2019cites this paper
• Tax benefits , Peer Pressure and Corporate Inversions

  2019cites this paper
• References

  2019cites this paper
• The Pricing and Performance of Supercharged IPOs

  2019cites this paper
• Using IRS data to identify income shifting to foreign affiliates

  2019cites this paper
• Foreign cash holdings and credit rating: Evidence from U.S. multinationals

  2019cites this paper
• U.S. Firms’ Aversion to Inversions

  2019cites this paper
• The effects of financial reporting and disclosure on corporate investment: A review

  2019cites this paper
• Why are they hiding? Patent secrecy and patenting strategies

  2019cites this paper
• Foreign investment of US multinationals: The effect of tax policy and agency conflicts.

  2019cites this paper
• Tax avoidance of multinational entities : an empirical analysis of tax effects on investment, financial structures and repatriation of profits

  2019influential citation