Accounting Papers

Document Type

Journal Article

Date of this Version

9-2009

Publication Source

Journal of Accounting Research

Volume

47

Issue

4

Start Page

1027

Last Page

1059

DOI

10.1111/j.1475-679X.2009.00342.x

Abstract

The American Jobs Creation Act of 2004 (the Act) creates a temporary tax holiday that effectively reduces the U.S. tax rate on repatriations from foreign subsidiaries from 35% to 5.25%. Firms receive the reduced tax rate by electing to take an 85% dividends received deduction on repatriations in 2004 or 2005. This paper investigates the characteristics of firms that repatriate under the Act and how they use the repatriated funds. We find that firms that repatriate under the Act have lower investment opportunities and higher free cash flows than nonrepatriating firms. Further, we find that repatriating firms increase share repurchases during 2005 by approximately $60 billion more than nonrepatriating firms, an amount that cannot be explained by differences in earnings between the two groups of firms. This increase represents about 20% of the $291.6 billion repatriated by our sample firms under the Act.

Copyright/Permission Statement

This is the peer reviewed version of the following article: BLOUIN, J. and KRULL, L. (2009), Bringing It Home: A Study of the Incentives Surrounding the Repatriation of Foreign Earnings Under the American Jobs Creation Act of 2004. Journal of Accounting Research, 47: 1027–1059., which has been published in final form at doi: 10.1111/j.1475-679X.2009.00342.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

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Date Posted: 27 November 2017

This document has been peer reviewed.