Making Only America Great? Non-US Market Reactions to US Tax Reform

• 成果类型: Article
• 署名作者: Gaertner, Fabio B.; Hoopes, Jeffrey L.; Williams, Braden M.
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of North Carolina; University of North Carolina Chapel Hill; University of Texas System; University of Texas Austin
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3451
• 发表日期: 2020
• 页码: 687-697
• 关键词: Political economy; corporate tax; COMPETITION; Tax reform; TCJA

摘要

We study the foreign externalities of the recent U.S. tax reform, commonly known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine foreign firms' stock returns around key tax reform events. We find significant heterogeneity in market responses by country, industry, and firm. Chinese firms experience large negative returns, especially in steel, business equipment, and chemical manufacturers, whereas the rest of the world experiences positive returns. Firms operating in more differentiated product markets experience positive returns, whereas firms in financial distress experience negative returns, consistent with the TCJA having competitive repercussions. We also find that firms experiencing decreases in effective tax rates following tax reform experience positive returns. Overall, our results suggest that the TCJA had varied, yet systematic effects on foreign firms' shareholders' wealth and the global competitive landscape.