The Effect of the 2017 U.S. Tax Reform on U.S. Acquisitions of Foreign Firms

60 Pages Posted: 28 May 2020

See all articles by Harald Amberger

Harald Amberger

Vienna University of Economics and Business

Leslie A. Robinson

Dartmouth College - Tuck School of Business; Dartmouth College - Accounting

Date Written: May 1, 2020

Abstract

The Tax Cuts and Jobs Act (TCJA) of 2017 is the most significant tax reform that the U.S. has experienced in decades, thereby changing incentives for many significant corporate investment decisions. We emphasize the key tax reform provisions altering incentives for outbound investment and examine changing patterns in outbound acquisitions of U.S. firms before and after the TCJA. We find a decreased probability that a foreign target is acquired by a U.S. firm after the TCJA, particularly those that hold IP or are located in low-tax or low-growth markets. We also find a decreased probability that a U.S. firm with untaxed foreign earnings closes a foreign M&A deal after the TCJA, but an increased probability if the firm had no significant foreign presence prior to the TCJA. Taken together our results suggest that the TCJA was largely effective in reducing tax distortions to outbound M&A activity.

Keywords: TCJA, acquisitions, tax reform, repatriation taxes, M&A

JEL Classification: H25, H20, G34

Suggested Citation

Amberger, Harald Johannes and Robinson, Leslie, The Effect of the 2017 U.S. Tax Reform on U.S. Acquisitions of Foreign Firms (May 1, 2020). WU International Taxation Research Paper Series No. 2020-06, Tuck School of Business Working Paper No. 3612783, Available at SSRN: https://ssrn.com/abstract=3612783 or http://dx.doi.org/10.2139/ssrn.3612783

Harald Johannes Amberger

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Leslie Robinson (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Dartmouth College - Accounting ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-4018 (Phone)

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