Stock Repurchases and the 2017 Tax Cuts and Jobs Act

64 Pages Posted: 3 Sep 2019 Last revised: 25 Oct 2019

See all articles by Benjamin Bennett

Benjamin Bennett

Tulane University - A.B. Freeman School of Business

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business; European Corporate Governance Institute (ECGI)

Zexi Wang

Lancaster University

Date Written: August 27, 2019

Abstract

We study the effects of the 2017 Tax Cuts and Jobs Act (TCJA) on repurchases, leverage and investment. The TCJA generates tax windfalls through a repatriation tax cut and a corporate income tax cut. Using monthly repurchase data from SEC filings, we find the surge of repurchases after the TCJA is driven by the repatriation tax cut, and not the income tax cut. Executive incentives and employee ownership affect TCJA-triggered repurchases. Investments increase, primarily in response to the income tax cut and especially for capital-constrained, low-leverage, or profitable firms. Highly-levered firms with high income taxes reduce their leverage significantly.

Keywords: Investment, Leverage, Repatriation, Repurchase, TCJA

JEL Classification: G31, G32, G35, G38

Suggested Citation

Bennett, Benjamin and Thakor, Anjan V. and Wang, Zexi, Stock Repurchases and the 2017 Tax Cuts and Jobs Act (August 27, 2019). Available at SSRN: https://ssrn.com/abstract=3443656 or http://dx.doi.org/10.2139/ssrn.3443656

Benjamin Bennett (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

HOME PAGE: https://sites.google.com/site/benjaminbennettfinance/home

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Zexi Wang

Lancaster University ( email )

Lancaster University Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom

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