Publication Type
Journal Article
Version
acceptedVersion
Publication Date
7-2021
Abstract
Using a global sample of multinational corporations (MNCs) and their foreign subsidiaries, we find that repatriation taxes impair subsidiary-level investment efficiency. Consistent with internal agency conflicts between the central management of the MNC and the manager of the foreign subsidiary being the driver, we show that this effect is concentrated in subsidiaries with high information asymmetry and in subsidiaries that are weakly monitored. Quasi-natural experiments in the U.K. and Japan establish a causal relationship for our findings and suggest that a repeal of repatriation taxes increases subsidiary-level investment efficiency while reducing the level of investment. Our paper provides timely empirical evidence to inform expectations for the effects of a recent change to the U.S. international tax law that eliminated repatriation taxes from most of the future foreign earnings of U.S. MNCs.
Keywords
repatriation tax, agency conflicts, investment, internal capital
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Governance, Auditing and Risk Management
Publication
Accounting Review
Volume
96
Issue
4
First Page
1
Last Page
25
ISSN
0001-4826
Identifier
10.2308/TAR-2019-0259
Publisher
American Accounting Association
Citation
AMBERGER, Harald J.; MARKLE, Kevin S.; and SAMUEL, Daniel M. P..
Repatriation taxes, internal agency conflicts, and subsidiary-level investment efficiency. (2021). Accounting Review. 96, (4), 1-25.
Available at: https://ink.library.smu.edu.sg/soa_research/1974
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2308/TAR-2019-0259
Comments
Nominated for the 2021 VHB Best Paper Award