Coming Home to America: Dividend Repatriations by U.S. Multinationals

60 Pages Posted: 29 Dec 2006 Last revised: 13 Jul 2010

See all articles by James R. Hines Jr.

James R. Hines Jr.

University of Michigan; NBER

R. Glenn Hubbard

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: April 1989

Abstract

This paper analyzes the financial flows from foreign subsidiaries of American multinational corporations to their parent corporations in the U.S. These repatriations are important not only to U.S. investors, who thereby have access to those funds, but also to the U.S. government, which generally does not tax foreign earnings of controlled foreign corporations until they are repatriated. The paper reviews the current tax system as applied to multinational firms, and considers the incentives it creates for various intra-firm financial transactions (in particular, the form of repatriations). These incentives appear to be inconsistent with historical repatriation patterns from aggregate time-series data on the overseas operations of U.S. multinationals. To resolve this inconsistency, we explore the determinants of distributions by foreign subsidiaries to their U.S. parent corporations, using new micro data on 12,041 controlled foreign corporations (and their 453 U.S. parents) collected from tax returns for 1984. This source exposes variations in distribution patterns not detectable in aggregate data. In particular, the data suggest that most subsidiaries paid no dividends to their parents in 1984, and that the U.S. government collected very little revenue on their foreign income while distorting their internal financial transactions.

Suggested Citation

Hines, James Rodger and Hubbard, Robert Glenn, Coming Home to America: Dividend Repatriations by U.S. Multinationals (April 1989). NBER Working Paper No. w2931. Available at SSRN: https://ssrn.com/abstract=467569

James Rodger Hines (Contact Author)

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

NBER

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Robert Glenn Hubbard

Columbia Business School - Finance and Economics ( email )

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New York, NY 10027
United States

HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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