TY  - JOUR
AU  - Faulkender,Michael
AU  - Petersen,Mitchell
TI  - Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15248
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15248
L1  - http://www.nber.org/papers/w15248.pdf
N1  - Author contact info:
Michael Faulkender
University of Maryland
RH Smith School of Business
4411 Van Munching Hall
College Park, MD 20742
Tel: 301-405-1064
E-Mail: mfaulken@rhsmith.umd.edu

Mitchell A. Petersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1281
Fax: 847/491-5719
E-Mail: mpetersen@northwestern.edu
AB  - The American Jobs Creation Act (AJCA) significantly lowered US firms' tax cost when accessing their unrepatriated foreign earnings. Using this temporary shock to the cost of internal financing, we examine the role of capital constraints in firms' investment decisions. Controlling for the capacity to repatriate foreign earnings under the AJCA, we find that a majority of the funds repatriated by capital constrained firms were allocated to approved domestic investment. Contrary to other examinations of the AJCA, we find little change in leverage and equity payouts. These findings demonstrate the importance of understanding finance theory when designing optimally targeted tax incentives.
ER  -