Bond market Association holidays
Search for Other Articles By Author
Article Citation:Susan M. Albring, Lillian F. Mills, and Kaye J. Newberry (2011) Do Debt Constraints Influence Firms' Sensitivity to a Temporary Tax Holiday on Repatriations?. The Journal of the American Taxation Association: Fall 2011, Vol. 33, No. 2, pp. 1-27.
MAIN ARTICLESSusan M. Albring, Lillian F. Mills, and Kaye J. Newberry
Susan M. Albring is an Assistant Professor at Syracuse University, Lillian F. Mills is a Professor at The University of Texas at Austin, and Kaye J. Newberry is a Professor at the University of Houston.
We appreciate able research assistance from John Chan. We also thank Jennifer Blouin, Jay Hartzell, Ken Klassen, Richard Sansing (editor), Thomas Schultz, three anonymous referees, participants at the 2007 American Accounting Association Annual Meeting, and participants at the 2010 JATA Conference for helpful comments and suggestions. Financial assistance from the Martin J. Whitman School of Management is gratefully acknowledged.
We examine whether U.S. multinationals' private and public debt constraints influence their responses to a temporary reduction in repatriation taxes (tax holiday). Using a sample of 421 U.S. multinationals with permanently reinvested earnings, we find that external debt constraints played an important role in determining their responses to the tax holiday. Specifically, we find that firms subject to fewer financial covenants in their private debt agreements or with greater access to public bond markets repatriated significantly more of their eligible funds. Our results suggest that U.S. multinationals with greater access to external debt markets have more flexibility to time their repatriations around a tax holiday and, as such, they are the primary beneficiaries of any tax savings. It is unlikely that these firms were the intended target of the American Jobs Creation Act (AJCA) 2004, given the stated legislative goals of directing repatriated funds toward financial stabilization and previously unfunded positive return investments.
JEL Classifications: M4; H2; L1.
Cited byMichelle L. Nessa. (2017) Repatriation Tax Costs and U.S. Multinational Companies' Shareholder Payouts. The Accounting Review 92:4, 217-241.
Online publication date: 1-Oct-2016.
Scott D. Dyreng and Kevin S. Markle. (2016) The Effect of Financial Constraints on Income Shifting by U.S. Multinationals. The Accounting Review 91:6, 1601-1627.
Online publication date: 1-Feb-2016.
Jian Cao, Yunhao Chen, Roy Clemons and Michael R. Kinney. (2014) Political Scrutiny and Tax Law Compliance: Evidence from the American Jobs Creation Act of 2004. The Journal of the American Taxation Association 36:2, 1-26.
Online publication date: 1-Mar-2014.
Michaele Morrow and Robert C. Ricketts. (2014) Financial Reporting versus Tax Incentives and Repatriation under the 2004 Tax Holiday. The Journal of the American Taxation Association 36:1, 63-87.
Online publication date: 1-Sep-2013.
Jennifer L. Blouin. (2011) DISCUSSION OF Do Debt Constraints Influence Firms' Sensitivity to a Temporary Tax Holiday on Repatriations?. The Journal of the American Taxation Association 33:2, 29-33.
Online publication date: 1-Oct-2011.
Volume 33, Issue 2
Click to get an email alert for every new issue of