Do Repatriation Tax Holidays Promote Corporate Social Responsibility? Evidence from the American Jobs Creation Act

In response to the temporary tax holiday introduced by the American Jobs Creation Act, U.S. multinational corporations repatriated approximately $300 billion from foreign subsidiaries to the United States. We find that repatriating firms invest at least a portion of the repatriated funds in corporate social responsibility (CSR) initiatives, as evidenced by the increasing CSR ratings of repatriating firms relative to non-repatriating firms during the years after repatriation. The effect of repatriation on CSR ratings is more pronounced for financially unconstrained firms, poorly governed firms, and firms located in states with increasing stakeholder preferences for CSR. Taken together, our findings are more consistent with the agency view of CSR spending and suggest an unintended consequence of the repatriation tax holiday.

Professor Liandong Zhang

Dr. Liandong Zhang is Professor of Accounting at School of Accountancy at the Singapore Management University. He joined Singapore Management University in 2017 as the Associate Dean (Research) at School of Accountancy. Dr. Zhang graduated from Tsinghua University, Beijing and received his PhD Degree in Accounting from Nanyang Technological University in 2008. He has previously taught at the Concordia University in Canada and City University of Hong Kong. His current research interests include financial reporting quality, corporate governance, and taxation. He currently teaches Accounting Theory.

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