"How Would Market Capitalization of Multinational Firms Respond to a 15% Global Minimum Tax on Corporate Profits?"
Date of Award
Spring 2022
Degree Name
Bachelor of Science (BS)
Advisor(s)
Stanley Veliotis
Abstract
This paper studies the stock market reaction, measured through change in market capitalization, to the announcement of the planned implementation of a 15% global minimum tax (GMT) following the guidelines of Pillar Two of the OECD’s GloBE Proposal. I employ a novel approach that broadly assumes firms with overall foreign ETR below 15% would be reassessed by the market under the assumption of a 15% floor rate for overall foreign ETR under the GMT. Projection of a 15% minimum rate indicates a collective tax increase of $9 billion across sample firms for a 55% increase in overall foreign tax for affected firms. OLS regression analysis indicates that U.S. multinational firms likely subject to an increased foreign tax burden under a 15% GMT saw a negative effect on market capitalization following the OECD announcement of the final rate on October 8, 2021. This result indicates that investors expected a 15% rate and an increased likelihood of reform to impose significant costs on multinational companies that currently benefit from lower taxes.
Recommended Citation
Kam, Edrick, ""How Would Market Capitalization of Multinational Firms Respond to a 15% Global Minimum Tax on Corporate Profits?"" (2022). Gabelli School of Business Honors Thesis Collection. 29.
https://research.library.fordham.edu/gabelli_thesis/29
