Cross-border Effects of a Major Tax Reform - Evidence from the European Stock Market

38 Pages Posted: 19 Apr 2019 Last revised: 22 Apr 2019

See all articles by Michael Overesch

Michael Overesch

Universität zu Köln

Max Pflitsch

University of Cologne

Date Written: March 27, 2019

Abstract

We analyze the effect of a major tax reform on foreign firms. While foreign firms that are active in the respective country should be directly affected, other foreign firms could also be indirectly affected through competition. On the evening of December 15th, 2017, the final version of the U.S. “Tax Cuts and Job Act” was published. With an event study design, we show that following the announcement, the European market overall exhibits positive abnormal returns. We find particularly positive market returns for the European firms that generate revenues in the United States. Our results also suggest that the European firms that face strong competition from U.S. firms exhibit significantly lower returns.

Keywords: U.S. tax reform, stock returns, event study, cross-border effects, international competition

Suggested Citation

Overesch, Michael and Pflitsch, Max, Cross-border Effects of a Major Tax Reform - Evidence from the European Stock Market (March 27, 2019). Available at SSRN: https://ssrn.com/abstract=3342182 or http://dx.doi.org/10.2139/ssrn.3342182

Michael Overesch (Contact Author)

Universität zu Köln ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany
0221/470-5605 (Phone)

HOME PAGE: http://www.steuer.uni-koeln.de/

Max Pflitsch

University of Cologne ( email )

Albertus-Magnus-Platz
WiSo-Gebäude
Cologne, 50923
Germany

HOME PAGE: http://www.steuer.uni-koeln.de/

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