Measuring the Expected Effects of the Global Tax Reform
Review of Financial Studies
86 Pages Posted: 11 Mar 2022 Last revised: 22 Mar 2023
Date Written: March 20, 2023
Over 140 countries agreed on a fundamental corporate tax reform in 2021 to be implemented in 2023 and beyond. To measure its potential effects, we study asset price changes within minutes of the reform announcements. We construct proxies for the reform's costs regarding U.S. companies' tax burdens and countries' public finances. Likely exposed companies exhibit significant negative stock returns. Our lower-bound estimates indicate total shareholder value losses of $112.6 billion one day after the reform announcements. Further, likely exposed countries experience increases in sovereign debt credit risk. Our findings inform the cost-benefit analysis of a historical international tax reform.
Keywords: International tax reform, asset prices, regulation, tax avoidance, tax competition, high-frequency identification
JEL Classification: H20, H25, H26, G12, E44
Suggested Citation: Suggested Citation