International Tax and Public Finance

, Volume 25, Issue 3, pp 581–630 | Cite as

Investor valuations of Japan’s adoption of a territorial tax regime: quantifying the direct and competitive effects of international tax reform

  • Sebastien Bradley
  • Estelle Dauchy
  • Makoto Hasegawa


This paper examines the impact of Japan’s 2009 adoption of a territorial tax regime using event study methods which leverage individual firm characteristics to identify underlying drivers of market reactions. Differences in Japanese firms’ foreign and domestic effective tax rates yield an aggregate capitalization effect of \(\yen \)4.3 trillion, while firms with less prior foreign exposure and fewer opportunities for tax avoidance experienced relatively larger abnormal returns. We attribute these results to tax savings on existing undistributed foreign earnings, enhanced opportunities for international expansion, and cultural biases against tax planning. Spillovers to the US (through tax or firm competition) appear insignificant.


International tax reform Japanese dividend exemption Territorial taxation Multinational tax avoidance Tax competition Event study 

JEL Classification

H25 H32 F23 K34 H26 



We are grateful to Alexey Khazanov, Anton Radice, and Alfiya Sagitova for excellent research assistance. We thank Rosanne Altshuler, Sebastian Bause, Dhammika Dharmapala, Peter Egger, Jim Hines, Kevin Markle, Peter Merrill, Tom Neubig, Leslie Robinson, Martin Ruf, Joanna Wu, anonymous referees, and conference and seminar participants at the International Institute of Public Finance, International Tax Policy Forum, National Tax Association, International Tax Policy Forum/American Enterprise Institute, the European Institute for Advanced Studies in Management, and the University of Tübingen for their helpful comments.

Compliance with ethical standards

Conflict of interest

The authors have no relevant or material financial interests that relate to the research described in this paper.


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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Department of Economics, LeBow College of BusinessDrexel UniversityPhiladelphiaUSA
  2. 2.Campaign for Tobacco Free KidsInternational ResearchWashingtonUSA
  3. 3.National Graduate Institute for Policy Studies (GRIPS)TokyoJapan

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