Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act

Michael Faulkender and Mitchell Petersen

No 15248, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The American Jobs Creation Act (AJCA) significantly lowered US firms' tax cost when accessing their unrepatriated foreign earnings. Using this temporary shock to the cost of internal financing, we examine the role of capital constraints in firms' investment decisions. Controlling for the capacity to repatriate foreign earnings under the AJCA, we find that a majority of the funds repatriated by capital constrained firms were allocated to approved domestic investment. While unconstrained firms account for a majority of repatriated funds, no increase in investment resulted. Contrary to other examinations of the AJCA, we find little change in leverage and equity payouts.

JEL-codes: G31 G32 G38 K34 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-bec and nep-reg
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Petersen, Mitchell A. and Michael Faulkender. 2012. Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act. Review of Financial Studies. 25(11): 3351-3388.

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Journal Article: Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act (2012)
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