Repatriation Tax Costs and U.S. Multinational Companies' Shareholder Payouts

Posted: 20 Mar 2015 Last revised: 20 Oct 2016

See all articles by Michelle L. Nessa

Michelle L. Nessa

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Date Written: September 26, 2016

Abstract

This paper examines whether and to what extent repatriation tax costs constrain U.S. multinational companies’ (MNCs) distributions to shareholders. During the 1987-2004 sample period, I find repatriation tax costs decrease U.S. MNCs’ dividend payments, and the economic magnitude of the effect is substantial. I do not find evidence repatriation tax costs decrease U.S. MNCs’ share repurchases on average. I find cross-sectional variation in the effect of repatriation tax costs on share repurchases based on U.S. MNCs’ opportunities to fund repurchases through external borrowing and to minimize the incremental U.S. cash tax cost of repatriations. I do not observe an association between repatriation tax costs and U.S. MNCs’ dividend payments or share repurchases during a more recent time period (2009-2014). This study contributes to our understanding of the impact of the current U.S. worldwide tax system on U.S. MNCs’ real decisions and of the determinants of firms’ payout policies.

Keywords: Repatriation taxes, dividends, repurchases

Suggested Citation

Nessa, Michelle L., Repatriation Tax Costs and U.S. Multinational Companies' Shareholder Payouts (September 26, 2016). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2580185 or http://dx.doi.org/10.2139/ssrn.2580185

Michelle L. Nessa (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,424
PlumX Metrics