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The effect of tax policy on the repatriation of foreign earnings is a topic of ongoing discussion among policymakers, academics, and the popular press. It has become more salient due to the 2017 Tax Cuts and Jobs Act (TCJA), which permanently removed repatriation tax. This paper synthesizes the academic literature examining US multinational firms’ responses to the repatriation tax holiday initiated by the 2004 American Jobs Creation Act (AJCA), which temporarily reduced the tax on the repatriation of foreign earnings. By synthesizing firm responses to the temporary tax reduction, we identify similarities and differences in: (1) theories about why and when repatriation tax affects firms’ repatriation decisions; (2) empirical evidence of whether repatriation tax affects firms’ repatriation decisions; and (3) empirical evidence of whether repatriation tax affects firms’ investment decisions. The analyses provide insights into the effect of the permanent removal of repatriation tax under the TCJA and explore avenues for future research. This synthesis of the AJCA literature informs tax research and practice as well as policymaking.

The extent to which firms repatriate indefinitely reinvested foreign earnings (IRFE) has been a major issue in the US tax system. Congress enacted provisions in the 2017 Tax Cuts and Jobs Act (TCJA) specifically to remove tax barriers to repatriation. However, little is known regarding the repatriation of IRFE outside of the temporary tax incentive provided by the 2004 American Jobs Creation Act (AJCA). In this chapter, I provide evidence on such repatriations by identifying a sample of 67 firms from 2009 to 2015 that reverse the indefinite reinvestment designation of foreign earnings and announce a repatriation of foreign cash. In contrast to repatriations following the 2004 AJCA, I do not find evidence that a single economic factor, such as share repurchases, motivates the repatriation. Although, in general, I do not find evidence of a significant market response to the announcements, I find evidence of a negative market reaction to announcements by low foreign effective tax rate (ETR) firms without tax offsets, suggesting that the tax may not be fully priced. Overall, I provide insight into the reasons and implications of the announced repatriation of IRFE.

In view of the recent enhanced concerns of the SEC and PCAOB that Accounting Principles Board Opinion No. 23 (APB 23)–asserting firms do not comply with the “sufficient evidence” criteria of APB 23, we examine whether APB 23–asserting firms that declared their foreign earnings as permanently reinvested abroad are less likely to repatriate those foreign earnings under the American Jobs Creation Act (AJCA) of 2004, compared with similar non-asserting firms. The asserting firms are required to disclose sufficient evidence that validates an ability to meet their domestic cash needs with only earnings generated in the United States and their plans to indefinitely reinvest foreign earnings outside the United States. Estimates show that asserting firms are more likely to repatriate their foreign earnings than non-asserting firms. In addition, we find that the probability of making an election to repatriate permanently invested foreign earnings under the AJCA of 2004 is higher for firms with nonbinding foreign tax credit (FTC) limitations that have made an APB 23 declaration to permanently invest foreign earnings abroad. These findings suggest that asserting firms’ declarations to indefinitely reinvest foreign earnings abroad are not well grounded, thereby indirectly validating the SEC’s and PCAOB’s increased scrutiny for supporting evidence for APB 23 assertion. The estimates also show that the likelihood of making an election to repatriate foreign earnings under the AJCA of 2004 increases with asserting firms’ liquidity constraints and financial distress: the financial characteristics listed as part of APB 23 criteria of sufficient evidence and highlighted by the SEC and PCAOB comment letters, indicating that asserting firms raid permanently reinvested foreign earnings to satisfy their financial needs and constraints.

Krull (2004) finds that US multinational corporations (MNCs) increase amounts designated as permanently reinvested earnings (PRE) to maximize reported after-tax earnings and meet earnings targets. We extend this research by examining the relationship between executive equity compensation and the opportunistic use of PRE by US MNCs, and the market reaction to earnings management using PRE designations. Firms use equity compensation to incentivize executives to strive for maximum shareholder wealth. One unintended consequence is that executives may engage in earnings management activities to increase their equity compensation. In this study, we examine whether the equity incentives of management are associated with an increased use of PRE. We predict and find strong evidence that the changes in PRE are positively associated with the portion of top managers' compensation that is tied to stock performance. In addition, we find this relationship to be strongest for firms that meet or beat forecasts, but only with the use of PRE to inflate income, suggesting that equity compensation incentivizes managers to opportunistically use PRE, especially to meet analyst forecasts.

Further, we provide evidence that investors react negatively to beating analysts' forecasts with the use of PRE, suggesting that investors find this behavior opportunistic and not fully convincing. This chapter makes an important contribution to what we know about the joint effects of tax policy, generally accepted accounting principles, and incentive compensation on the earnings reporting process.

The issue of export instability exerts an enduring fascination for economists with an interest in the area of economic development. Over several decades a voluminous literature has emerged embracing debates on the domestic consequences and on the causes of export instability. The purpose here is to examine these debates and an attempt is made to set out different theoretical stances, to classify and examine empirical findings, and to indicate the directions in which the debates have moved. Such a statement of a review article's purpose is, of course, incomplete without more specific delineation of the boundaries within which the general objectives are pursued. Here that delineation has three facets.

A distinction must be drawn between a dismissal on the one hand, and on the other a repudiation of a contract of employment as a result of a breach of a fundamental term of that contract. When such a repudiation has been accepted by the innocent party then a termination of employment takes place. Such termination does not constitute dismissal (see London v. James Laidlaw & Sons Ltd (1974) IRLR 136 and Gannon v. J. C. Firth (1976) IRLR 415 EAT).

Allyn Young′s lectures, as recorded by the young Nicholas Kaldor, survey the historical roots of the subject from Aristotle through to the modern neo‐classical writers. The focus throughout is on the conditions making for economic progress, with stress on the institutional developments that extend and are extended by the size of the market. Organisational changes that promote the division of labour and specialisation within and between firms and industries, and which promote competition and mobility, are seen as the vital factors in growth. In the absence of new markets, inventions as such play only a minor role. The economic system is an inter‐related whole, or a living “organon”. It is from this perspective that micro‐economic relations are analysed, and this helps expose certain fallacies of composition associated with the marginal productivity theory of production and distribution. Factors are paid not because they are productive but because they are scarce. Likewise he shows why Marshallian supply and demand schedules, based on the “one thing at a time” approach, cannot adequately describe the dynamic growth properties of the system. Supply and demand cannot be simply integrated to arrive at a picture of the whole economy. These notes are complemented by eleven articles in the Encyclopaedia Britannica which were published shortly after Young′s sudden death in 1929.

The theme of this issue of Managerial Finance is managing corporate tax. Accompanying contributions address capital budgeting, financing, dividends, and financial reporting.

The purpose of this work is to analyse both from a theoretical and an empirical point of view the reversal of positive and negative temporary differences in Spanish firms and, derived from the reversal, to question whether the comprehensive allocation or the partial allocation of temporary differences is more or less profitable for firms.

The audited annual accounts of the firms registered in the Comisión Nacional del Mercado de Valores – the Spanish version of the SEC – during the periods 1996, 1997 and 1998 were analysed. To analyse the differences obtained, the sample was first disaggregated into different groups, according to whether the differences were positive or negative temporary reversed. A calculation was made of some descriptive statistics together with an analysis of both the mean and the variance, which made it possible to draw robust conclusions on the way Spanish firms report their positive and negative temporary differences reversed.

The paper provides information about the positive and negative temporary differences reversals by year (1996, 1997 and 1998) and by sector of activities (energy and water, construction, transport and communications, real estate and others) in the sample period and compares them over time.

The highest percentage corresponds to “other negative and positive temporary differences reversals” including those cases where firms do not specify which type of operation has motivated the difference and use the comprehensive allocation of temporary differences; it is very difficult to follow up all the future reversals.

A very useful source of information for Spanish firms and for investigators in this subject.

This paper is pioneering in the analysis of the reversal of temporary differences in Spanish firms, as well as in determining whether the use of the comprehensive or partial tax allocation of temporary differences is more or less appropriate.

This study investigates the effects of credit access and tax structures on the performance of Manufacturing SMEs in Malaysia.

This study uses the dynamic panel system generalized method of moments, controlling for firm-specific as well as macroeconomic effects

The paper finds that (1) debt funding is not conducive to SME performance; (2) access to non-bank credit sources and tax incentives support SME performance by lowering opportunity costs of riskier projects; (3) existing tax structures in Malaysia inhibit SME growth and encourage manipulation of accounts; and (4) investors in Malaysia prefer SMEs that are more conservative in their accounting and taxation practices.

Access to Malaysian SME data is restricted. Although robust methods are used, there is a chance that different conclusions may arise with a much larger sample.

The findings provide clear direction in the discussion and enactment of new policies that support SME growth especially in support of non-bank credit sources instead of revising tax policies. The paper also contributes by providing guidance to future SME studies that are inhibited by limited access to data.

SME-related studies on credit access and tax structures have often relied on traditional metrics (e.g. total amount of bank loans; tax expenses) to measure its impact on entrepreneurial/SME performance. Although relevant to the past, financial policies have evolved to embrace Industrial Revolution 4.0. This paper is a shift from the traditional by investigating the impact of new and innovative sources of funding such as incubators and crowdfunding. Also, since one cannot exist without the other, examining the joint impact of credit access and tax structures provides a more holistic view on policy-making, something prior studies have not addressed.