| Popis: |
In this paper, we develop and test the hypothesis that tax repatriation costs increase the uncertainty embedded in cash holdings. The intuition behind our empirical prediction relies on the notion that tax repatriation costs are a strong indication that part of the cash is not available to shareholders but is trapped abroad. Using a large sample of U.S. firms during the 1991-2012 period and an array of proxies for market uncertainty, we find evidence consistent with our hypothesis. Specifically, we document that the interaction of cash holdings with tax repatriation costs decreases the precision of analysts’ forecasts and generates differential belief revisions among investors. These findings help shed light on the implications and on the economic consequences of cash holdings and offer support to the SEC’s recent effort to encourage companies to increase disclosure of their cash holdings. |
