Financial Economist
U.S. Securities and Exchange Commission
Jake Smith, PhD
Financial Economist
U.S. Securities and Exchange Commission
I am a financial economist at the U.S. Securities and Exchange Commission. I received a Ph.D. in Finance from The University of Texas at Dallas, a M.S. from the University of South Florida, and a B.S. from the University of South Florida Sarasota-Manatee. My research spans a variety of topics in empirical corporate finance, including mergers and acquisitions, climate finance, and corporate taxation.
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CV | Email | Google Scholar | SSRN
Working Papers
Tax Avoidance through Cross-Border Mergers and Acquisitions
with Jean-Marie Meier
Revise and resubmit, Journal of Accounting Research
Abstract
We provide the first comprehensive analysis of tax avoidance through cross-border, tax-haven mergers and acquisitions (M&A). Using novel tax residence data, we investigate 5,230 transactions from 1990 to 2017 where the target resides in a haven, totaling $1.7 trillion in deal value, or 12% of cross-border M&A volume. To illustrate the magnitude, for a US firm with no prior cross-border, tax-haven 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 3.74 percentage points. Tax haven M&A enables profit-shifting on intellectual property and the relocation of headquarters to havens, and results in $20.8 billion in recurring annual tax savings.
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Conference Presentations
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Financial Intermediation Research Society Conference, Berlin
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Seventh Annual M&A Research Centre Conference, London
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Fifth Edinburgh Corporate Finance Conference, Edinburgh
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2022 ZEW Public Finance Conference, Mannheim
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Paris December 2021 Finance Meeting, online
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2021 FOM Conference, Hanover
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7th IWH-FIN-FIRE Workshop on "Challenges to Financial Stability," Halle (Saale)
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China International Conference in Finance 2021, Shanghai
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SFS Cavalcade 2021, online
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Midwest Finance Association 2021, online
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Journal of Law, Finance, and Accounting 2020, online
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European Economic Association 2020, online
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10th EIASM Conference on Current Research in Taxation, online
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Poster Session
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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, 25% of the deal value involves a firm that is reassigned. Moreover, reassigned firms are systematically different from other firms along several dimensions, including effective tax rates.
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Award
Best Paper in Corporate Finance at the SFS Cavalcade North America 2023
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Research Grant
$15,000 from the International Tax Policy Forum
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Conference Presentations
NTA's 116th Annual Conference on Taxation, Denver
79th Annual Congress of the International Institute of Public Finance, Logan
SFS Cavalcade 2023, Austin
12th EIASM Conference on Current Research in Taxation, online
12th Financial Markets and Corporate Governance Conference, online
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The Outsized Role of Tax Havens in Mergers and Acquisitions
with Jean-Marie Meier
Abstract
Tax havens are used for tax minimization. Whether tax havens affect corporate control in the form of cross-border mergers and acquisitions (M&A) or are merely used as conduits between host and destination countries of (greenfield) foreign direct investment and portfolio investment is an open question. We provide new stylized facts through the first comprehensive analysis of cross-border, tax-haven mergers and acquisitions (M&A). Using novel tax residence data, we investigate 13,318 such transactions from 1990 to 2017, totaling $4.2 trillion in deal value, or 29% of cross-border M&A volume. $2.4 of the $4.2 trillion exceeds our prediction based on a gravity model with economic fundamentals. Small havens such as Bermuda alone make up $1.1 trillion or 8% of cross-border M&A volume. For identification, we use a change in US tax law in 2004.
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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 firms exhibit a behavioral bias known as attribute substitution in their adjustment to climate change, since they make an estimate of the impact based on local temperatures, an easily accessible proxy, rather than the true determining factors.
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Awards
Second Prize for the Best Paper in Accounting and Corporate Finance at the Research Symposium on Finance and Economics
Runner-up for the best PhD paper in the category of Corporate Governance & Social Responsibility at the 13th Financial Markets and Corporate Governance Conference
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Conference Presentations
Research Symposium on Finance and Economics, online
13th Financial Markets and Corporate Governance Conference, online
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.
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Poster Session
American Economic Association 2022, online