Taxation of International Investment and Accounting Valuation*

Anja M. B. De Waegenaere · Richard C. Sansing

63 citations0/0 files storedContemporary Accounting Research

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Corporate Taxation and Avoidance Taxation and Legal Issues Financial Reporting and Valuation Research

Abstract

This paper develops a model of a firm's foreign investment decisions and characterizes its optimal investment and repatriation strategies. It then derives the theoretical relation between firm value and the book value of the deferred tax liability associated with such investments or, if no liability is recognized for financial reporting purposes, the reduction in firm value associated with permanently reinvested foreign earnings. It shows that the valuation relevance of these items depends on whether the earnings are invested in operating assets or financial assets. It also shows the effects of a temporary tax holiday on firm value.

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References

1994Fiscal Paradise: Foreign Tax Havens and American Business 1991Taxes and Business Strategy: A Planning Approach 1970TAXES, MARKET VALUATION AND CORPORATE FINANCIAL POLICY 1985Tax policy and foreign direct investment 2011Financial Accounting Standards Board (FASB)2002Repatriation taxes, repatriation strategies and multinational financial policy 2009Bringing It Home: A Study of the Incentives Surrounding the Repatriation of Foreign Earnings Under the American Jobs Creation Act of 2004 2004Permanently Reinvested Foreign Earnings, Taxes, and Earnings Management

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2014Noncompliance with Mandatory Disclosure Requirements: The Magnitude and Determinants of Undisclosed Permanently Reinvested Earnings 2012How Do Cross-Country Differences in Corporate Tax Rates Affect Firm Value?2018Repatriation Taxes, Internal Agency Conflicts, and Subsidiary-Level Investment Efficiency 2020(Un)intended consequences? The impact of the 2017 tax cuts and jobs act on shareholder wealth 2008Taxes and Financial Assets: Valuing Permanently Reinvested Foreign Earnings

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