Research
Peer-Reviewed Publications
Harris, Jeremiah and William O'Brien, 2022, Do U.S. Firms Disguise Acquisitions to Avoid Taxes? Financial Review, 57: 95-127. (Online Appendix)
Austin, Josh, Jeremiah Harris, and William O'Brien, 2020, Do the Most Prominent Firms Really Make the Worst Deals? How Selection Issues Affect Inferences from M&A Studies, Journal of Banking and Finance, 118. (Online Appendix)
Harris, Jeremiah and William O'Brien, 2018, U.S. Worldwide Taxation and Domestic Mergers and Acquisitions, Journal of Accounting and Economics, 66: 419-438. (Online Appendix)
Harris, Jeremiah and Ralph Siebert, 2017, Firm-Specific Time Preferences and Postmerger Firm Performance, International Journal of Industrial Organization, 53: 32-62.
Working Papers
U.S. Multinationals’ Alternatives to Paying Taxes
(with William O'Brien, R&R at the Journal of Corporate Finance) We investigate how U.S. multinationals’ pre-2018 capital structure and tax planning actions were affected by potential repatriation taxes. We construct a proxy for exogenous changes to repatriation tax rates and find it is positively associated with bond issuance and debt ratios, but only for repatriation-tax-sensitive multinationals. These results are concentrated in firms with lower costs of debt capital. Additionally, after repatriation tax increases, tax-sensitive multinationals were more likely to pursue tax-free repatriation techniques (we provide several examples of these complex, lesser-known techniques) but not more likely to pursue inversions. Our findings have important implications for current and proposed tax policies.
Investor Attention Around Corporate Restructurings
(with Jonathan Kalodimos and William O'Brien) We investigate investor behavior and firm performance related to corporate restructuring announcements using a database of Security Exchange Commission (SEC) filings by U.S. firms and web traffic on the SEC’s website. We find that abnormal investor attention positively predicts restructuring announcements for up to three months prior to the announcement and attention stays elevated for at least twelve months afterwards. This is true for attention from both retail investors and mutual funds. We also find that abnormal attention prior to a restructuring announcement is positively related to long-run abnormal returns to the firm ; these effects are amplified if the initial market reaction to the restructuring announcement was positive and are stronger if the integration cost of a firm’s information is low. Our results are consistent with investors focusing their limited attention on restructuring plans with the highest probability of restructuring success.
Information Discovery in Consecutive Cross-Border Mergers
I find evidence that announcement day returns to second mergers are greater that the first mergers for consecutive cross-border mergers, contrasting consecutive domestic (U.S.) mergers where returns significantly decline from the first to the second merger. This paper suggests that the increasing returns can be explained by information discovered by investors about the quality of the first merger upon announcement of the second merger. Using heterogeneity in various measures of uncertainty regarding the first merger, I find the increasing returns are concentrated in consecutive mergers where the level of uncertainty about the first merger is the greatest.
Artificial Intelligence, Clinical Trial Efficiency, and Market Reaction
(with Sean Cao and Lijun (Gillian) Lei) While AI is often heralded as a panacea, we still grapple with understanding the optimal ways to harness its potential. This study examines the factors that enhance AI’s application in clinical trials. We find that, on average, AI decreases the efficiency of trial development and leads to lower market reactions to trial completion. However, when management has a technical background to integrate the medical domain knowledge with AI, trial efficiency and market reactions improve. A long-term perspective on corporate investment also enhances AI’s effectiveness; a short-term perspective may compromise the timeline necessary to achieve the long-term benefits of AI. Although intensive regulation is associated with more positive market reactions to trial completion when AI is used, it often reduces efficiency, revealing regulatory oversight's double-edged nature. Our findings highlight that AI is not as universally beneficial as media sentiment suggests and that successful integration of AI in medical trials necessitates careful calibration, underscoring the importance for other industries to consider domain-specific factors to prevent futile AI implementations.
Adapting Innovation When Facing Economic Uncertainty
(with Dandan Liu and Xiaoling Pu) It is well known that innovation generally declines when faced with uncertainty; this study extends the literature by documenting heterogeneity in how firms adapt their innovation activities when facing aggregate economic uncertainty. We show that firms’ responses are related to both internal factors such as patent types, asset redeployability, patent assignments, and financial constraints, as well as external factors such as ownership by myopic investors. The negative relationship with uncertainty is exaggerated by financial constraints and mitigated by redeployability while the detrimental effects of myopic investors on innovation are greatly dampened during periods of high aggregate economic uncertainty.
Works in Progress
An Investigation of the Relation Between U.S. Multinationals' Domestic Investment and Repatriation Tax Sensitivity (with William O'Brien)
At the request of the BEA, Dr. O'Brien and I have prepared a proposal to study the effect of repatriation taxes on domestic investment, specifically capital investment, research and development expenses, and employment using confidential firm-level data collected by the BEA.
Project accepted in 2022 by the Bureau of Economic Analysis as part of their Special Sworn Researcher Program
8-K Filings and the Investor Divide: How Speed and Technology Shape Institutional and Retail Performance (with Stephen Owen)
This research project aims to examine the immediate price movement associated with SEC 8-K announcements using a large sample of over 800,000 non-earnings-related 8-K filings combined with tick-level pricing data. Our primary research question addresses whether institutional investors quickly infer the value implications of these 8-K announcements and execute advantageous trades before retail investors can respond results in a performance gap. Using the COVID-19 pandemic as a shock to retail investor participation and using the advent of ChatGPT as a shock to retail investors technological resources, we hypothesize that the first shock will increase the performance gap between retail and institutional investors while the second shock will decrease the gap.
The Impact of Acquisitions on Local Business Activity (with Shawn Rohlin and Richard Thakor)
We combine establishment-level InfoGroup data with SDC M&A events to show the impact of an acquisition on local business activity. To overcome endogeneity concerns, we use withdrawn acquisitions (acquisitions that were announced but not completed) to provide a baseline for comparison with the treated areas where mergers are completed.
Do Patent Assignments Facilitate Tax-Motivated Profit Shifting?
In this project, I use a novel dataset from the USPTO that captures patent assignments (the transfer of ownership to another entity). If firms are using patent assignments for profit shifting to low tax jurisdictions, we would expect to see a decline in effective tax rates after the assignment of patents to entities in low-tax countries.
Permanent Working Papers
Determinants and Consequences of Reactive Divestitures
(with Vusal Eminli, last revised August 2018) This study shows that firms react to market and investor pressure by divesting subsidiaries. We find that these divestitures tend to follow negative earnings announcements and are associated with firms most likely to be facing financial difficulties. Consistent with firms reacting to increasing pressure to improve performance, the relationship between negative earnings announcements is strengthened when the firm has repeated negative earnings. Further pressure is applied to the firms by transient institutional investors focused on short-term strategies. When a firm reacts to pressure resulting from negative earnings and divests, the firm’s market value and Tobin’s Q increase.