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Shareholder Wealth Effects of Border Adjustment Taxation

60 Pages Posted: 24 Apr 2017 Last revised: 21 Jun 2017

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill

Edward L. Maydew

University of North Carolina at Chapel Hill

Date Written: June 20, 2017

Abstract

Following two decades of discussion, the border adjustment tax emerged as a serious component of corporate tax reform in early 2017. While heavily debated, little empirical evidence exists regarding the border adjustment tax. We provide evidence on the shareholder wealth effects by examining equity market reactions on days with high attention paid to the proposed tax. Contrary to predictions that the tax would be trade neutral, we find firms in high import industries (e.g., retailers), measured using both aggregate government industry data and firm-level shipping container data, suffer negative returns on days the tax had a greater likelihood of adoption.

Keywords: Border Adjustment Tax, Border Tax, Corporate Tax, Fundamental Tax Reform

JEL Classification: H25, K34

Suggested Citation

Gaertner, Fabio B. and Hoopes, Jeffrey L. and Maydew, Edward L., Shareholder Wealth Effects of Border Adjustment Taxation (June 20, 2017). Available at SSRN: https://ssrn.com/abstract=2956740 or http://dx.doi.org/10.2139/ssrn.2956740

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Jeffrey L. Hoopes (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Edward L. Maydew

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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