Michael Faulkender

University of Maryland
RH Smith School of Business
4417 Van Munching Hall
College Park, MD 20742
Tel: 301-405-1064

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Department of the Treasury

NBER Working Papers and Publications

September 2017Understanding the Rise in Corporate Cash: Precautionary Savings or Foreign Taxes
with Kristine W. Hankins, Mitchell A. Petersen: w23799
What has driven the dramatic rise in U.S. corporate cash? Using non-public data, we show that the run-up is not uniform across firms but is concentrated in the foreign subsidiaries of multinational firms. Standard precautionary motives explain only domestic cash holdings, not these burgeoning foreign cash balances. Falling foreign tax rates, coupled with relaxed restrictions on income shifting, are the root of the changing foreign cash patterns. Firms with intellectual property have the greatest ability to shift income to low tax jurisdictions, and their foreign subsidiaries are where we observe the largest accumulations of cash.

Published: Michael W Faulkender & Kristine W Hankins & Mitchell A Petersen, 2019. "Understanding the Rise in Corporate Cash: Precautionary Savings or Foreign Taxes," The Review of Financial Studies, vol 32(9), pages 3299-3334.

August 2009Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act
with Mitchell Petersen: w15248
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. While unconstrained firms account for a majority of repatriated funds, no increase in investment resulted. Contrary to other examinations of the AJCA, we find little change in leverage and equity payouts.

Published: Petersen, Mitchell A. and Michael Faulkender. 2012. Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act. Review of Financial Studies. 25(11): 3351-3388. citation courtesy of

September 2003Does the Source of Capital Affect Capital Structure?
with Mitchell A. Petersen: w9930
Empirical examinations of capital structure have led some to conclude that firms are under-levered. Implicit in this argument and much of the empirical work on leverage is the assumption that the availability of incremental capital depends solely on the risk of the firm's cash flows and characteristics of the firm. However, the same market frictions that make capital structure relevant suggest that firms may be rationed by lenders, leading some firms to appear to be under-levered relative to unconstrained firms. We examine this theory, arguing that the same characteristics that may be associated with firms being rationed by the debt markets are also associated with financial intermediaries, opposed to bond markets, being the source of a firm's debt capital. We find that firms have signific...


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