Repatriation Taxes and Foreign Cash Holdings: The Impact of Anticipated Tax Reform

67 Pages Posted: 6 Mar 2017 Last revised: 8 Dec 2017

See all articles by Lisa De Simone

Lisa De Simone

Stanford Graduate School of Business

Joseph D. Piotroski

Stanford Graduate School of Business

Rimmy E. Tomy

University of Chicago

Date Written: December 7, 2017

Abstract

We examine whether anticipation of a repatriation tax reduction affects the amount of cash U.S. multinational corporations (MNCs) hold overseas. We find that U.S. MNCs most likely to benefit from a repatriation tax reduction accumulated significant cash holdings once Congress proposed legislation, at the expense of reduced shareholder payouts, relative to firms unlikely to benefit. This behavior was accompanied by complementary activities designed to maximize expected tax benefits. We contribute to the literature on how firms respond to tax-induced incentives, provide a new explanation for U.S. MNC cash holding growth, and raise questions about the consequences of U.S. tax reform.

Keywords: Multinational corporate taxation, Repatriation, Foreign cash

JEL Classification: H25, G38, G30, M16

Suggested Citation

De Simone, Lisa and Piotroski, Joseph D. and Tomy, Rimmy, Repatriation Taxes and Foreign Cash Holdings: The Impact of Anticipated Tax Reform (December 7, 2017). Stanford University Graduate School of Business Research Paper No. 17-21. Available at SSRN: https://ssrn.com/abstract=2927120 or http://dx.doi.org/10.2139/ssrn.2927120

Lisa De Simone (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-3874 (Phone)
650-724-3083 (Fax)

HOME PAGE: http://www.gsb.stanford.edu/faculty-research/faculty/lisa-de-simone

Joseph D. Piotroski

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Rimmy Tomy

University of Chicago ( email )

Booth School of Business
5807 S Woodlawn Ave
Chicago, IL 60637
United States

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