The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?

60 Pages Posted: 22 Jun 2020 Last revised: 30 Jun 2020

See all articles by Alexander F. Wagner

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Alexandre Ziegler

University of Zurich - Department of Banking and Finance

Multiple version iconThere are 4 versions of this paper

Date Written: June 17, 2020

Abstract

The Tax Cut and Jobs Act (TCJA) slashed corporations’ median effective tax rates from 31.7% to 20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TCJA’s impacts account for just half of actual impacts. Stock prices impounded those proxies during the legislative process. Total impacts were impounded the following year, once firms published their financials. These results indicate that investors find it hard to predict even large and immediate changes to company cash flows due to unfamiliar events.

Keywords: Corporate Taxes, Tax Cut And Jobs Act, Event Study, Market Efficiency, Tax Reform

JEL Classification: G12, G14, H25, O24

Suggested Citation

Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre, The Tax Cuts and Jobs Act: Which Firms Won? Which Lost? (June 17, 2020). Swiss Finance Institute Research Paper No. 20-48, Available at SSRN: https://ssrn.com/abstract=3629722 or http://dx.doi.org/10.2139/ssrn.3629722

Alexander F. Wagner (Contact Author)

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Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Alexandre Ziegler

University of Zurich - Department of Banking and Finance ( email )

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Zürich, 8032
Switzerland

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