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Investor valuations of Japan’s adoption of a territorial tax regime: quantifying the direct and competitive effects of international tax reform

Sebastien Bradley, Estelle Dauchy () and Makoto Hasegawa ()
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Estelle Dauchy: International Research

International Tax and Public Finance, 2018, vol. 25, issue 3, 581-630

Abstract: Abstract This paper examines the impact of Japan’s 2009 adoption of a territorial tax regime using event study methods which leverage individual firm characteristics to identify underlying drivers of market reactions. Differences in Japanese firms’ foreign and domestic effective tax rates yield an aggregate capitalization effect of $$\yen $$ ¥ 4.3 trillion, while firms with less prior foreign exposure and fewer opportunities for tax avoidance experienced relatively larger abnormal returns. We attribute these results to tax savings on existing undistributed foreign earnings, enhanced opportunities for international expansion, and cultural biases against tax planning. Spillovers to the US (through tax or firm competition) appear insignificant.

Keywords: International tax reform; Japanese dividend exemption; Territorial taxation; Multinational tax avoidance; Tax competition; Event study (search for similar items in EconPapers)
JEL-codes: H25 H32 F23 K34 H26 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform (2014) Downloads
Working Paper: Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform (2014) Downloads
Working Paper: Investor Valuations of Japan's Adoption of a Territorial Tax Regime: Quantifying the Direct and Competitive Effects of International Tax Reform (2014) Downloads
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