This paper investigates the direct theoretical relationship between the variance of stock returns (σ2E) and financial leverage (L) considering both corporate and personal taxes. Using a dataset of U.S. industrial firms, we examine the variance of stock returns as a function of the firm’s...

This study estimates the corporate tax savings from financial derivatives. I document a 3.6 and 4.4 percentage point reduction in three-year current and cash effective tax rates (ETRs), respectively, after a firm initiates a derivatives program. The decline in cash ETR equates to $10.69 million...

This paper examines the cross-sectional relation between leverage and future stock returns. Prior research documents a puzzling negative correlation. We show that it is largely caused by firms' use of internal financing when having significant off-balance-sheet operating assets due to...

As a direct response to the recent trend in corporate expatriations, politicians have questioned the patriotism of firms that reorganize outside the U.S. and introduced numerous legislative proposals designed to prevent corporate expatriations. The implicit assumption made in proposing this...

Using a random sample of 60% of our cross-sectional data on U.S. stocks from 1964 to 2012, we trained four machine learning algorithms to forecast debt paydown over a one-year horizon. An evaluation of these candidate models on half of the hold-out sample (20% of the original dataset) showed...

Tax minimization strategies may lead to significant tax savings, which could, in turn, increase firm value. However, such strategies are also associated with significant costs, such as expected penalties and planning, agency, and reputation costs. The overall impact of firms' tax minimization...

Massive dollars shuttled back and forth among firms on the twisted path to and passage of the 2017 tax reform. Prices of individual stocks responded to the difference between initial and revised expectations. From the bill's initiation in the House to final passage, high-tax firms gained...

The American Jobs Creation Act of 2004 permitted a one-time 85% dividend received deduction for repatriated foreign earnings. A stated purpose of this legislation was to permit companies to access foreign earnings domestically that would have been too costly previously because of repatriation...

I investigate the effect of different measures of corporate taxes on stock returns. The results support the partisan politics cycle effect on equity returns. A high minus low (Hi-Lo) portfolio sorted by (Total Corporate Taxes/Total Assets) has an annual return of +3.8% during Republican...