(Un)intended consequences? The impact of the 2017 tax cuts and jobs act on shareholder wealth
Plečnik, James M.
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Summary in foreign language
We study the stock market reactions to the Tax Cuts and Jobs Act (TCJA), the most signiﬁcant structural U.S. tax reform in over 30 years. In line with the stated intent of TCJA proponents, we ﬁnd that the Act beneﬁted highly taxed ﬁrms. However, the Act hindered ﬁrms with international operations as well as ﬁrms with high interest expense and tax losses. Counter to claims that the TCJA would quickly spur economic growth, we ﬁnd that ﬁnancially constrained and high growth opportunity ﬁrms did not beneﬁt. Rather, market participants anticipate that most of the TCJA’s beneﬁts will be passed on to shareholders via higher corporate payouts. We conﬁrm these market expectations by documenting that ﬁrms did increase payouts via repurchases after the TCJA, but did not increase their corporate investments.
Link to resourcehttps://www.sciencedirect.com/science/article/pii/S0378426620301266?via%3Dihub#keys0001
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