Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act / Dhammika Dharmapala, C. Fritz Foley, Kristin J. Forbes.

Format:

Book

Author/Creator:

Dharmapala, Dhammika.

Contributor:

National Bureau of Economic Research.

Foley, C. Fritz.

Forbes, Kristin J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15023.

NBER working paper series no. w15023

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Watch What I Do, Not What I Say

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

This paper analyzes the impact on firm behavior of the Homeland Investment Act of 2004, which provided a one-time tax holiday for the repatriation of foreign earnings by U.S. multinationals. The analysis controls for endogeneity and omitted variable bias by using instruments that identify the firms likely to receive the largest tax benefits from the holiday. Repatriations did not lead to an increase in domestic investment, employment or R&D -- even for the firms that lobbied for the tax holiday stating these intentions and for firms that appeared to be financially constrained. Instead, a $1 increase in repatriations was associated with an increase of almost $1 in payouts to shareholders. These results suggest that the domestic operations of U.S. multinationals were not financially constrained and that these firms were reasonably well-governed. The results have important implications for understanding the impact of U.S. corporate tax policy on multinational firms.

Notes:

Print version record

June 2009.