Transition Tax Exposure, Investor Types, and Firm Payout Policy

58 Pages Posted: 13 Nov 2019 Last revised: 5 Apr 2024

Date Written: November 1, 2019

Abstract

This study explores corporate payout policy changes among U.S. based multinationals post-Tax Cuts and Jobs Act (TCJA) of 2017, focusing on the role of investor types—transient, dedicated, and quasi-indexers—and transition tax exposure (TTE). Results indicate that the degree of dedicated investor ownership significantly influences the TTE-driven increase in share repurchases in response to the TCJA, while dividend adjustments are not investor type-sensitive but react to TTE. These insights illuminate the nuanced interplay among fiscal policy, investor composition, and corporate strategies, contributing to our understanding of how tax reforms impact corporate financial behavior and governance.

*This paper was previously titled "Unlocking Trapped Foreign Cash, Investor Types, and Firm Payout Policy."

Keywords: Cash, Tax, Corporate Payout, Payout Policy, Stock Repurchases, Dividends, Investment, Fiscal Policy, Firm Behavior, Tax Cuts and Jobs Act, Institutional Investors

JEL Classification: G35, G32, G23, M40, H32, H30, H20, F23

Suggested Citation

Olson, Erik, Transition Tax Exposure, Investor Types, and Firm Payout Policy (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=3479506 or http://dx.doi.org/10.2139/ssrn.3479506

Erik Olson (Contact Author)

Vanderbilt University ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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