Policy Effects of International Taxation on Firm Dynamics and Capital Structure

Adam Spencer ()

MPRA Paper from University Library of Munich, Germany

Abstract: I develop and calibrate an industry equilibrium model with heterogeneous multinational firms to study the impact of a potential policy change from the current U.S. worldwide taxation system to a territorial system on firm investment, capital structure, payout policy and tax revenues. Firms in the model make both intensive and extensive margin decisions in terms of overseas investment. They optimally choose dividend payments to shareholders, holdings of riskless debt securities and earnings repatriations from the subsidiary to the parent in each period. To estimate the impact of the policy change, I solve the model under both worldwide and territorial systems and compare the stationary equilibria. The results show that the policy change causes both domestic and overseas production by U.S. firms to rise. In addition, firms borrow more and pay larger dividends to shareholders. These effects on firm variables are coupled with a rise in U.S. Government tax collections.

Keywords: Multinational corporations; Firm dynamics; Capital structure; Corporate taxation; Repatriation tax (search for similar items in EconPapers)
JEL-codes: F23 G32 H25 L11 (search for similar items in EconPapers)
Date: 2017-05-06
New Economics Papers: this item is included in nep-acc, nep-dge and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Policy Effects of International Taxation on Firm Dynamics and Capital Structure (2022)
Working Paper: Policy effects of international taxation on firm dynamics and capital structure (2020)
Working Paper: Policy effects of international taxation on firm dynamics and capital structure (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78990

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