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.
(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 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.
(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 and non-retail sources. We also find that abnormal attention prior to a restructuring announcement is positively related to long-run abnormal returns to the restructuring firm, with non-retail abnormal attention being a stronger predictor of future performance than retail abnormal attention; these effects are amplified if the market’s return 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 those with the highest probability of restructuring success.
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.
(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
Who Profits From SEC Form 8-K Announcements? Institutional Investors Take From Retail Investors (with Stephen Owen)
Using a large sample of 800k plus non-earnings-related 8-Ks combined with tick-level data provided by polygon.io, we study the immediate price movement associated with the mandated announcement of material events. Using AI to infer value implications of the announcement, we hypothesize that the institutional investors will quickly execute trades that profit from the delayed reaction by retail investors. In line with Ben-Rephael, Da, Easton, and Israelsen (2022), we expect to find that 8-K announcements disproportionately enrich the institutional investors while claiming to protect the retail investors.
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.
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
(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.