Title: Impact of repatriation taxes and earned/contributed capital mix on dividend repatriation policy: the moderating role of firm financial maturity

Authors: Muhammad Tahir; Haslindar Ibrahim; Abdul Hadi Zulkafli; Muhammad Mushtaq

Addresses: Department of Finance, School of Management, Universiti Sains Malaysia, 11800 Pulau Penang, Malaysia; Department of Management Sciences, University of Turbat, Baluchistan, Pakistan ' Department of Finance, School of Management, Universiti Sains Malaysia, 11800 Pulau Penang, Malaysia ' Department of Finance, School of Management, Universiti Sains Malaysia, 11800 Pulau Penang, Malaysia ' Department of Finance, Graduate School of Business, Universiti Sains Malaysia, 11800 Pulau Penang, Malaysia; Department of Commerce, University of Turbat, Balochistan, Pakistan

Abstract: This study aims to examine the effect of repatriation taxes and earned/contributed capital mix on the dividend repatriation policy of the foreign subsidiaries of US multinational corporations (MNCs) worldwide. In addition, it investigates the moderating effect of firm financial maturity on the relationship between repatriation taxes and dividend repatriation policy. The present study uses secondary data to evaluate the impact of various explanatory variables on dividend repatriation policy over 2006-2016. The difference generalised method of moments (GMM) estimator is applied to estimate the dynamic dividend repatriation models. The results suggest a significant inverse relationship between repatriation taxes and dividend repatriation policy. Further, a significant positive effect of the earned/contributed capital mix on the dividend repatriation policy is identified. Moreover, results indicate that firm financial maturity does not play a statistically significant role in minimising the negative effect of the repatriation tax rate on dividend repatriation policy.

Keywords: repatriation taxes; earned/contributed capital mix; dividend repatriation policy; firm financial maturity; multinational corporations; foreign subsidiaries; parent company; moderating effect; generalised method of moments; USA.

DOI: 10.1504/IJMEF.2020.107699

International Journal of Monetary Economics and Finance, 2020 Vol.13 No.2, pp.146 - 162

Received: 06 Sep 2019
Accepted: 11 Mar 2020
Published online: 08 Jun 2020 *

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