Real Effects of Accounting Rules: Evidence from Multinational Firms’ Investment Location and Profit Repatriation Decisions

We analyze survey responses from nearly 600 tax executives to better understand corporate decisions about real investment location and profit repatriation. Our evidence indicates that avoiding financial accounting income tax expense is as important as avoiding cash income taxes when corporations decide where to locate operations and whether to repatriate foreign earnings. This result is important in light of the recent research about whether financial accounting affects investment and in light of the decades of research on foreign investment that examines the role of cash income taxes but heretofore has not investigated the importance of financial reporting effects. Our analysis suggests that financial reporting is an important factor to be considered in the policy debates focused on bringing investment to the United States.     

Cities and the ‘War on Terror’

Programmes of organized, political violence have always been legitimized and sustained through complex imaginative geographies. These tend to be characterized by stark binaries of place attachment. This article argues that the discursive construction of the Bush administration’s ‘war on terror’ since September 11th 2001 has been deeply marked by attempts to rework imaginative geographies separating the urban places of the US ‘homeland’ and those Arab cities purported to be the sources of ‘terrorist’ threats against US national interests. On the one hand, imaginative geographies of US cities have been reworked to construct them as ‘homeland’ spaces which must be re‐engineered to address supposed imperatives of ‘national security’. On the other, Arab cities have been imaginatively constructed as little more than ‘terrorist nest’ targets to soak up US military firepower. Meanwhile, the article shows how both ‘homeland’ and ‘target’ cities are increasingly being treated together as a single, integrated ‘battlespace’ within post 9/11 US military doctrine and techno‐science. The article concludes with a discussion of the central roles of urban imaginative geographies, overlaid by transnational architectures of US military technology, in sustaining the colonial territorial configurations of a hyper‐militarized US Empire.     

CHILD SUPPORT AND MOTHERS' EMPLOYMENT

Previous research has found that child support receipts deter mothers' labor supply less than does other non-wage income. This paper argues that because child support is a variable income source, actual receipts may differ from unobservable permanent receipts on which hours worked are based. This introduces an errors-in-variables bias causing the estimated income effect of child support on hours worked to be biased toward zero. When one replaces actual receipts with predicted permanent receipts, such income effect is found to be statistically indistinguishable from that of other non-wage income.     

AUSTRALIAN BUSINESS CYCLE FACTS*

This paper documents the post-war business cycle facts for Australia. The Hodrick-Prescott filter is used to remove the trend component from quarterly macroeconomic series. The business cycle facts we report are the volatilities of the cyclical (detrended) series and their cross correlations with cyclical real output. These facts are consistent with the business cycle facts reported for the United States, the United Kingdom and New Zealand with one exception. For most of the period since 1974, the real wage in Australia is strongly counter-cyclical whereas for these countries it is procyclical.     

The Cost of Debt

We use exogenous variation in tax benefit functions to estimate firm‐specific cost of debt functions that are conditional on company characteristics such as collateral, size, and book‐to‐market. By integrating the area between the benefit and cost functions, we estimate that the equilibrium net benefit of debt is 3.5% of asset value, resulting from an estimated gross benefit (cost) of debt equal to 10.4% (6.9%) of asset value. We find that the cost of being overlevered is asymmetrically higher than the cost of being underlevered and that expected default costs constitute only half of the total ex ante costs of debt.