Do firms do what they say? The effect of the american jobs creation act of 2004 on R&D spending

Qi Dong, Xin Zhao

Research output: Contribution to journalArticle

Abstract

Prior studies debate whether the temporary tax holiday provided by the American Jobs Creation Act of 2004 (AJCA) increased firm spending on domestic investment. Since internal equity is an important funding source for research and development (R&D), and the AJCA lowered the cost of accessing internal equity through reduced repatriation tax rates, we hypothesize and find that on average, the AJCA led to increased firm spending on R&D. Our results bridge the gap between prior empirical results that do not show an average effect of increased domestic investment under the AJCA and survey results that report increased domestic investment as a common use of funds repatriated under the AJCA.

Original languageEnglish (US)
Pages (from-to)87-107
Number of pages21
JournalJournal of the American Taxation Association
Volume40
Issue number1
DOIs
StatePublished - Mar 1 2018

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Job creation
Domestic investment
Equity
Funding
Tax
Tax rate
Repatriation
Holidays
Costs
Empirical results

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance

Cite this

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Do firms do what they say? The effect of the american jobs creation act of 2004 on R&D spending. / Dong, Qi; Zhao, Xin.

In: Journal of the American Taxation Association, Vol. 40, No. 1, 01.03.2018, p. 87-107.

Research output: Contribution to journalArticle

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