Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform

61 Pages Posted: 9 Nov 2013 Last revised: 11 Feb 2016

See all articles by Sebastien Bradley

Sebastien Bradley

Drexel University

Estelle P. Dauchy

Campaign for Tobacco Free Kids

Makoto Hasegawa

Graduate School of Economics, Kyoto University

Date Written: January 31, 2016

Abstract

This paper examines the impact of Japan’s 2009 adoption of a territorial tax regime using event study methods which leverage individual firm characteristics to identify underlying drivers of market reactions. Differences in Japanese firms’ foreign and domestic effective tax rates yield an aggregate capitalization effect of ¥4.3 trillion, while firms with less foreign exposure and fewer opportunities for tax avoidance experienced relatively larger abnormal returns. We attribute these results to direct tax savings on existing undistributed foreign earnings, enhanced opportunities for international expansion, and cultural biases against tax planning. Spillovers to the U.S. (through tax or firm competition) appear insignificant.

Keywords: international tax reform, Japanese dividend exemption, territorial taxation, multinational tax avoidance, tax competition, event study

JEL Classification: H25, H32, F23, K34, H26

Suggested Citation

Bradley, Sebastien and Dauchy, Estelle P. and Hasegawa, Makoto, Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform (January 31, 2016). Available at SSRN: https://ssrn.com/abstract=2351365 or http://dx.doi.org/10.2139/ssrn.2351365

Sebastien Bradley

Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

Estelle P. Dauchy (Contact Author)

Campaign for Tobacco Free Kids ( email )

1400 I Street NW
Suite 1200
Washington, DC New York 20005
United States
5857542532 (Phone)

Makoto Hasegawa

Graduate School of Economics, Kyoto University ( email )

Yoshida-Honmachi, Sakyo-ku
Kyoto, 606-8501
Japan

HOME PAGE: http://sites.google.com/site/makotohasegawahome/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
110
Abstract Views
977
rank
268,171
PlumX Metrics