Article
Do Firms Do What They Say? The Effect of the American Jobs Creation Act of 2004 on R&D Spending
Journal of the American Taxation Association
(2017)
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.
Keywords
- American Jobs Creation Act (AJCA),
- R&D,
- tax holiday,
- repatriation tax,
- difference-in-differences
Disciplines
- Business and
- Accounting
Publication Date
Fall August, 2017
DOI
https://doi.org/10.2308/atax-51879
Citation Information
Qi (Flora) Dong and Xin Zhao. "Do Firms Do What They Say? The Effect of the American Jobs Creation Act of 2004 on R&D Spending" Journal of the American Taxation Association Vol. 40 (2017) p. 87 - 107 Available at: http://works.bepress.com/floradong/2/