Strategic Repatriations and Future Earnings Flexibility
ISBN: 978-1-83753-361-9, eISBN: 978-1-83753-360-2
Publication date: 16 June 2023
Abstract
I examine patterns of making or deferring strategic repatriations that firms can use to either meet analysts' forecasts or defer to maintain future reported earnings flexibility. First, I examine the extent to which firms repatriate earnings from high foreign tax subsidiaries to decrease US tax expense, resulting in increased net income and lower cash taxes. Using federal tax return information, I find evidence that firms strategically repatriate these earnings to meet or beat current analysts' forecasts. Next, I find evidence that firms that are able to obtain current year tax reductions defer these repatriations in an attempt to build cookie-jar reserves. Lastly, I find that firms do not disclose high foreign tax repatriations (HTRs), even when required by SEC rules. This study contributes to the earnings management, tax avoidance, and disclosure literature by examining a discretionary tax planning strategy.
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Acknowledgements
Acknowledgment
I thank my dissertation committee, Amy Dunbar (chair), Joe Golec, John Phillips, Steve Utke, and David Weber, for their valuable comments. Also, I thank Erik Beardsley, Allison Koester, Christina Lewellen, Tom Omer, Terry Shevlin, participants at the 2017 University of Illinois Tax Symposium, Erin Towery discussant, the accounting faculty at James Madison University, and an anonymous reviewer for their helpful comments. I also thank Ted Black, Bill Trautman and Biyu Wu for their valuable assistance.
Citation
Duxbury, A. (2023), "Strategic Repatriations and Future Earnings Flexibility", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 30), Emerald Publishing Limited, Leeds, pp. 37-70. https://doi.org/10.1108/S1058-749720230000030002
Publisher
:Emerald Publishing Limited
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