TY - JOUR
T1 - Taxes and financial assets
T2 - Valuing permanently reinvested foreign earnings
AU - Bryant-Kutcher, Lisa
AU - Eiler, Lisa
AU - Guenther, David A.
PY - 2008/12
Y1 - 2008/12
N2 - We investigate the value of permanently reinvested earnings (PRE) of foreign subsidiaries of U.S. multinationals. We focus particularly on how firm value is affected by reinvesting PRE in financial rather than operating assets, where the reinvestment in financial assets is to avoid the U.S. repatriation tax. Consistent with prior studies, we find that the value of PRE is lower for those firms that disclose a positive U.S. tax associated with repatriation of PRE. Consistent with our hypothesis, we find that this lower value is concentrated in the subset of firms with high amounts of excess cash, our proxy for tax-related, reinvestment in financial assets.
AB - We investigate the value of permanently reinvested earnings (PRE) of foreign subsidiaries of U.S. multinationals. We focus particularly on how firm value is affected by reinvesting PRE in financial rather than operating assets, where the reinvestment in financial assets is to avoid the U.S. repatriation tax. Consistent with prior studies, we find that the value of PRE is lower for those firms that disclose a positive U.S. tax associated with repatriation of PRE. Consistent with our hypothesis, we find that this lower value is concentrated in the subset of firms with high amounts of excess cash, our proxy for tax-related, reinvestment in financial assets.
UR - http://www.scopus.com/inward/record.url?scp=64549099064&partnerID=8YFLogxK
U2 - 10.17310/ntj.2008.4.07
DO - 10.17310/ntj.2008.4.07
M3 - Article
AN - SCOPUS:64549099064
SN - 0028-0283
VL - 61
SP - 699
EP - 720
JO - National Tax Journal
JF - National Tax Journal
IS - 4 PART 1
ER -