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Do Debt Constraints Influence Firms' Sensitivity To A Temporary Tax Holiday On Repatriations?

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Executive Summary

This paper examines whether U.S. multinationals' private and public debt constraints influence their responses to a temporary reduction in repatriation taxes. Using a sample of 421 U.S. multinationals with permanently reinvested earnings, the author finds that external debt constraints played an important role in determining their responses to the tax holiday. Specifically, they find that firms subject to fewer financial covenants in their private debt agreements or with greater access to public bond markets repatriated significantly more of their eligible funds.

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