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How Firms' Foreign Tax Credit Limitation Affects the Amount of Foreign Assets Deployed


  • B. Anthony Billings

    (Wayne State University)

  • Mbodja Mougoué

    (Wayne State University)

  • Buagu Musazi

    (Morgan State University)


There is a paucity of research evidence regarding the likely long-term economic consequences of firms' foreign tax credit (FTC) status on asset deployment between the United States and foreign locations. The existing literature primarily focuses on income, not asset, shifting with respect to FTC status. The authors empirically show that after allowing for adjustment costs through Tobin's quotient, assets shift in a direction opposite to the traditional income shift for U.S. multinational corporations with prolonged binding FTC limitation. Regression results for approximately 261 U.S. multinational corporations with various years of missing data for the 1997 through 2003 period indicate that the amount of foreign asset allotment is an increasing function of the duration of firms' FTC limitation spell (cumulative number of the sampled years the firm is FTC limited) for firms in or greater than equilibrium Tobin's quotient.

Suggested Citation

  • B. Anthony Billings & Mbodja Mougoué & Buagu Musazi, 2009. "How Firms' Foreign Tax Credit Limitation Affects the Amount of Foreign Assets Deployed," Public Finance Review, , vol. 37(2), pages 170-197, March.
  • Handle: RePEc:sae:pubfin:v:37:y:2009:i:2:p:170-197

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