The Effect of Income Shifting Incentives on Share Repurchases Evidence from U.S. Multinational Corporations

40 Pages Posted: 26 May 2023

See all articles by Baban Eulaiwi

Baban Eulaiwi

affiliation not provided to SSRN

Fatmah Saeed Alghamdi

King Abdulaziz University

Ahmed Al-Hadi

affiliation not provided to SSRN

Lien Duong

Curtin University of Technology; Curtin University

Grantley Taylor

Curtin University - School of Accounting

Abstract

Research AbstractThis study analyzes the association between income shifting incentives and share repurchases using a hand-collected sample of U.S. multinational corporations (MNCs) from 2006 to 2020. We find a significant negative association between income shifting and share repurchases. Additionally, the negative relationship between income shifting and share repurchases is stronger in firms with high repatriation costs. However, in firms with an advance pricing agreement with the Internal Revenue Service, a positive association between income shifting and share repurchases is evident. Our findings are robust to tests that address self-selection bias (propensity score matching) and endogeneity (difference-in-differences).

Keywords: Income shifting, share repurchases, Advance Pricing Agreement, repatriation costs, U.S. multinational corporations

Suggested Citation

Eulaiwi, Baban and Alghamdi, Fatmah Saeed and Al-Hadi, Ahmed and Duong, Lien and Duong, Lien and Taylor, Grantley, The Effect of Income Shifting Incentives on Share Repurchases Evidence from U.S. Multinational Corporations. Available at SSRN: https://ssrn.com/abstract=4460134 or http://dx.doi.org/10.2139/ssrn.4460134

Baban Eulaiwi (Contact Author)

affiliation not provided to SSRN

Fatmah Saeed Alghamdi

King Abdulaziz University ( email )

P.O.Box 80200
Jeddah, 21589
Saudi Arabia

Ahmed Al-Hadi

affiliation not provided to SSRN ( email )

No Address Available

Lien Duong

Curtin University of Technology ( email )

School of Accounting, Curtin Business School
GPO Box U1987
Perth, WA 6845
Australia
(618) 9266 1212 (Phone)
(618) 9266 7196 (Fax)

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

Grantley Taylor

Curtin University - School of Accounting ( email )

Australia

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