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Is U.S. Multinational Intra-Firm Dividend Policy Influenced By Capital Market Incentives?

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Executive Summary

This paper finds evidence to suggest that public-company reporting by U.S. Multinational Corporations (MNCs) creates disincentives to repatriate foreign earnings. Firms that operate under both U.S. international tax laws and accounting rules potentially face two costs when they repatriate foreign earnings: an actual cash tax liability and a reduction in reported accounting earnings. Using a confidential dataset of financial and operating characteristics of the foreign affiliates of MNCs combined with public company data over a six year period, they find evidence that capital market incentives have a negative effect on the amount of foreign earnings repatriated by MNCs.

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