Repatriation Taxes and Foreign Cash Holdings: The Impact of Anticipated Tax Reform

Forthcoming, Review of Financial Studies. DOI: 10.1093/rfs/hhy124

Posted: 6 Mar 2017 Last revised: 7 Dec 2018

See all articles by Lisa De Simone

Lisa De Simone

University of Texas at Austin

Joseph D. Piotroski

Stanford Graduate School of Business

Rimmy E. Tomy

University of Chicago

Date Written: November 19, 2018

Abstract

We examine whether an anticipated reduction in future repatriation taxes affects the amount of cash U.S. multinationals hold overseas. We find that the expected benefits of a repatriation tax reduction are positively associated with accelerated accumulations of global cash holdings once Congress proposed legislation. Additional tests examining domestic and foreign corporations, voluntary disclosures of foreign cash, and corporate payout behavior support our conclusion that observed increases in excess global cash are driven by changes in foreign cash. We also document that U.S. multinationals accumulating excess cash engage in complementary organizational and financial reporting activities designed to maximize expected tax benefits.

Keywords: Multinational corporate taxation, Repatriation, Foreign cash

JEL Classification: H25, G38, G30, M16

Suggested Citation

De Simone, Lisa and Piotroski, Joseph D. and Tomy, Rimmy, Repatriation Taxes and Foreign Cash Holdings: The Impact of Anticipated Tax Reform (November 19, 2018). Forthcoming, Review of Financial Studies. DOI: 10.1093/rfs/hhy124, Available at SSRN: https://ssrn.com/abstract=2927120 or http://dx.doi.org/10.2139/ssrn.2927120

Lisa De Simone (Contact Author)

University of Texas at Austin ( email )

2110 SPEEDWAY
Stop B6400
Austin, TX 78705
United States

HOME PAGE: http://www.lisa-desimone.com

Joseph D. Piotroski

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Rimmy Tomy

University of Chicago ( email )

Booth School of Business
5807 S Woodlawn Ave
Chicago, IL 60637
United States

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