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

46 Pages Posted: 19 Apr 2019 Last revised: 2 Dec 2020

See all articles by Michael Overesch

Michael Overesch

Universität zu Köln

Max Pflitsch

Technical University of Dortmund

Date Written: October 27, 2020

Abstract

We analyze the effects of the major U.S. tax reform of 2017 on European 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. With an event study design, we analyze stock market returns in Europe around key dates in the legislative process leading to the TCJA. We find positive market returns for the European firms that are active in the United States. Moreover, our results suggest an indirect effect through competition. European firms that face strong competition from U.S. firms in their domestic markets exhibit significantly lower returns.

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

JEL Classification: G12, G14, H25

Suggested Citation

Overesch, Michael and Pflitsch, Max, Cross-border Effects of a Major Tax Reform - Evidence from the European Stock Market (October 27, 2020). 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

Technical University of Dortmund ( email )

Emil-Figge-Straße 50
Dortmund, 44227
Germany

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