Abstract

http://ssrn.com/abstract=1337206
 
 

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Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act


Dhammika Dharmapala


University of Illinois College of Law

C. Fritz Foley


Harvard Business School; National Bureau of Economic Research (NBER)

Kristin J. Forbes


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

April 27, 2010

Journal of Finance, forthcoming
CELS 2009 4th Annual Conference on Empirical Legal Studies Paper
MIT Sloan Research Paper No. 4741-09

Abstract:     
The Homeland Investment Act provided a tax holiday for the repatriation of foreign earnings. Advocates argued the Act would alleviate financial constraints by reducing the cost to U.S. multinationals of accessing internal capital. This paper shows that repatriations did not increase domestic investment, employment or R&D—even for firms that appeared to be financially constrained or lobbied for the holiday. Instead, a $1 increase in repatriations was associated with a $0.60-$0.92 increase in shareholder payouts. Regulations intended to restrict such payouts were undermined by the fungibility of money. Results indicate that U.S. multinationals were not financially constrained and were well-governed.

Number of Pages in PDF File: 56

Keywords: Repatriations, financial constraints, governance, international taxation, flypaper effect

JEL Classification: G3, F23, G14, G18, H26

working papers series


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Date posted: February 4, 2009 ; Last revised: June 4, 2010

Suggested Citation

Dharmapala, Dhammika and Foley, C. Fritz and Forbes, Kristin J., Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act (April 27, 2010). Journal of Finance, forthcoming; CELS 2009 4th Annual Conference on Empirical Legal Studies Paper; MIT Sloan Research Paper No. 4741-09. Available at SSRN: http://ssrn.com/abstract=1337206 or http://dx.doi.org/10.2139/ssrn.1337206

Contact Information

Dhammika Dharmapala (Contact Author)
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
C. Fritz Foley
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-6375 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Kristin J. Forbes
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
Room E62-416
Cambridge, MA 02142
United States
617-253-8996 (Phone)
HOME PAGE: http://web.mit.edu/kjforbes/www
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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