George W. Kutner

Territorial Tax System Reform and Corporate Financial Policies

We examine the effect of a permanent change to a country corporate income repatriation tax system on corporate financial policies. In 2009, Japan and the United Kingdom switched from a worldwide system to a territorial system for the taxation of repatriated foreign earnings, effectively reducing the tax liabilities of most multinational firms when repatriating earnings. We find that after the change firms accumulate less cash, pay out larger amounts through dividends and share repurchases, and invest less abroad. We do not find that the tax system change has significantly affected domestic investments even when controlling for capital constraints.

Penn Square Bank, upstream correspondents, and CD contagion effects

Abstract Penn Square Bank was the largest failed bank to be liquidated by the FDIC. This paper examines the effects of this failure in the market for negotiable CDs. In particular, two major upstream banks, Continental Illinois and Northern Trust, are investigated, as well as First Chicago and the general CD market. Only Continental Illinois was found to be affected, paying an average of more than 50 basis points on CDs over the 6-month period following the Penn Square failure.