University of Texas at Dallas
Jake Smith,
PhD Candidate
Naveen Jindal School of Management | Finance
University of Texas at Dallas
I am a Finance PhD candidate at the University of Texas at Dallas. I am currently on the job market, and expect to graduate in May 2023. My research spans a variety of topics in empirical corporate finance, including mergers and acquisitions, climate finance, international corporate finance, and corporate taxation.
CV | Email | Google Scholar | SSRN
Working Papers
Climate Change Salience and Firm Investment
Job-Market Paper
Abstract
I hypothesize that firms are more likely to make investments that reduce their CO2 emissions intensity if the threat of climate change is more salient. To test this, I examine mergers and acquisitions (M&A) in the US from 2012-2021 and exploit exogenous variation in exposure to abnormally warm temperatures. Conditional on an M&A occurring, if the acquiror experienced abnormally warm temperatures at its headquarters within 6 months prior to the deal’s announcement, then the target has 15% lower estimated CO2 emissions intensity in the full sample of deals. The effect increases to 29% among deals where the acquiror has above median CO2 emissions intensity, as these are the types of firms most exposed to climate change transition costs. This paper shows that the way firms adjust to climate change suffers from a behavioral bias known as attribute substitution, since they make an estimate of the impact based on local temperatures, an easily accessible proxy, rather than the true determining factors.
Tax Avoidance through Cross-Border Mergers and Acquisitions
with Jean-Marie Meier
Abstract
We investigate 13,307 cross-border, tax-haven mergers and acquisitions (M&A) from 1990 to 2017, totaling $4.1 trillion in deal value, or about 30% of total cross-border M&A volume. $2.4 of the $4.1 trillion is beyond what is predicted based on a gravity model with economic fundamentals. Tax-haven M&A result in $31.6 billion in recurring annual tax avoidance. To illustrate the magnitude, for a US firm with no prior cross- border M&A history, buying an Irish firm worth 5% of its total assets would result in an expected decline in its effective tax rate of 3.56 percentage points. For identification, we use a change in US tax law in 2004. Following haven acquisitions, firms are more likely to relocate their headquarters to havens. Our results document that tax avoidance through havens is a significant determinant of cross-border M&A.
Conference Presentations
115th National Tax Association's Annual Conference on Taxation, Miami (scheduled)
2022 ZEW Public Finance Conference, Mannheim
Paris December 2021 Finance Meeting, online
2021 FOM Conference, Hanover
7th IWH-FIN-FIRE Workshop on "Challenges to Financial Stability," Halle (Saale)
China International Conference in Finance 2021, Shanghai
SFS Cavalcade 2021, online
Midwest Finance Association 2021, online
Journal of Law, Finance, and Accounting 2020, online
European Economic Association 2020, online
10th EIASM Conference on Current Research in Taxation, online
Poster Session
American Economic Association 2021, online
Improving the Measurement of Tax Residence: Implications for Research on Corporate Taxation
with Jean-Marie Meier
Abstract
We highlight an opportunity for improved measurement of a key data item in corporate tax research, a firm’s tax residence. Some countries define tax residence based on a firm’s location of incorporation, some on a firm’s location of headquarters, and some consider both locations. Because no firm-level tax residence database exists, studies typically apply a uniform assignment of either the location of incorporation, headquarters, or center of business activity. We use a novel algorithm that embeds the residency laws of 150 countries to accurately assign tax residence. We reassign the tax residence of a considerable fraction of firms relative to standard proxies, and provide evidence that reassignment significantly affects inferences. For instance, for cross-border mergers and acquisitions with a US acquiror, 16% of the deal value involves an acquiror that is reassigned. Moreover, reassigned firms are systematically different from other firms along several dimensions, including effective tax rates.
Conference Presentations
12th EIASM Conference on Current Research in Taxation, online
2022 Financial Markets and Corporate Governance Conference, online
Research Grant
$15,000 from the International Tax Policy Forum
The COVID-19 Bailouts
with Jean-Marie Meier
Published as a pre-print in Covid Economics, Issue 83, 2 July 2021.
Abstract
We use hand-collected data to investigate the COVID-19 bailouts for all publicly listed US firms. The median tax rate is 4% for bailout firms and 16% for no-bailout firms. The bailouts are expensive when compared to past corporate income tax payments of the bailout firms. We compute the number of years a bailout recipient has to pay corporate income tax to generate as much tax revenue as it received in bailouts: 135.0 years for the Paycheck Protection Program and 267.9 years for the airline bailouts. We also document a dark side of the bailouts. For many firms, the bailouts appear to be a windfall. Numerous bailout recipients made risky financial decisions, so bailing them out might induce moral hazard. Moreover, lobbying expenditures positively predict bailout likelihood and amount.
Poster Session
American Economic Association 2022, online