Measuring the Expected Effects of the Global Tax Reform

Gomez Cram, R and Olbert, M (2023) Measuring the Expected Effects of the Global Tax Reform. Review of Financial Studies, 36 (12). pp. 4965-5011. ISSN 0893-9454

Abstract

Over 140 countries agreed on a fundamental corporate tax reform in 2021 to be implemented in 2023 and beyond. To measure its potential effects, we study asset price changes within minutes of the reform announcements. We construct proxies for the reform's costs regarding U.S. companies' tax burdens and countries' public finances. Likely exposed companies exhibit significant negative stock returns. Our lower-bound estimates indicate total shareholder value losses of $112.6 billion one day after the reform announcements. Further, likely exposed countries experience increases in sovereign debt credit risk. Our findings inform the cost-benefit analysis of a historical international tax reform.