Harris, Jeremiah and William O'Brien, 2021, Do U.S. Firms Disguise Acquisitions to Avoid Taxes? Financial Review, 1-33. (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.
(with William O'Brien) 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 in repatriation-tax sensitive multinationals. These results are concentrated in firms with lower costs of debt capital. While multinationals were more likely to pursue tax-free repatriation techniques after repatriation tax increases (we provide several examples of these complex, lesser-known techniques), we find little evidence of increased inversion likelihood. Our findings have important implications for current and proposed tax policies.
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.
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.
Determinants and Consequences of Reactive Divestitures
(with Vusal Eminli) 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.
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. This builds on our research about repatriation tax proxies, such as Double Irish structures, and is in the advance stages of the approval process.
"The Impact of Acquisitions on Local Business Activity" (with C. Lockwood Reynolds and Shawn Rohlin)
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 are exploring the usage of withdrawn acquisitions (acquisitions that were announced but not completed) to provide a baseline for comparison with the treated areas where mergers are completed.
"Too Many Cooks in the Kitchen: The Dark Side of Monitoring" (with Jonathan Kalodimos and William O'Brien)
This project studies the effect of investor monitoring around corporate restructurings (i.e., plant closures, layoffs, or acquisitions) announced in 8-K statements. Although stock returns around the announcement dates are not particularly noteworthy, the long-term returns are quite positive, even after controlling for several risk factors that affect returns. We measure investor attention using downloads of filings from the SEC’s EDGAR database.
"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.