Taxes & the Recent Tax Reform
Aug 30, 2018
Professor Mitchell Petersen
Taxes & the Recent Tax Reform

Professor Petersen has a research project that explains the large run up in cash on the balance sheets of US firms (from $800B in 1994 to $3.2T in 2014). The answer is taxes. Most of the run up occurs in the foreign subsidiaries of these firms (think Apple Ireland), an in a small set of industries and firms.

The TCJA (Tax Cut and Jobs Act) dramatically changes the way we tax international operations (and domestic operations), and so changes what was is going to happen up front.

He will explain why this is or is not a problem (with all the cash trapped does that slow US growth – the view of Congress), how the changes in the taxes (both international and domestic) alter incentives to invest and thus what it means for the economy. He is not a macro economist, but he teaches a tax class at Kellogg. Taxes of course have macro (and micro economic) effects.

Mitchell Petersen is the Glen Vasel Professor of Finance and director of the Heizer Center for Private Equity and Venture Capital at the Kellogg School of Management, Northwestern University. 

Professor Petersen's research is in the area of empirical corporate finance: the question how firms choose which projects they should invest in and how they should fund those projects. His research has included exploring: how small firms are funded and the importance of lending relationships, how information technology has altered the way in which banks lend, how the changes in the supply of capital alter a firm’s access to capital, how firm’s manage risk, how the cost of funding changes over the seasons and why, as well as the role of international taxation in the firm’s investment decision. He was awarded the Smith-Breeden Prize for Outstanding Paper in the Journal of Finance in 1995 (for his paper "The Benefits of Lending Relationships: Evidence from Small Business Data") and the Michael Brennan Award for Best Paper in the Review of Financial Studies in 1998 (for his paper "Trade Credit: Theories and Evidence") and 2013 (for his paper “Investment and Capital Constraints: Repatriations Under the American Jobs Creation Act”). He was runner-up for the Brennan Award in 2008 (for his paper “Does the Source of Capital Affect Capital Structure”) and 2010 (for his paper “Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches”). The later paper also received the Review of Financial Studies – Editor’s Choice Award in 2010.

Professor Petersen was voted the Kellogg Professor of the Year in 2000, the Executive MBA Outstanding Professor in 2008, 2010, 2011, 2013, 2015, 2016, 2017, and 2018, and the Kellogg Alumni Professor of the Year in 2010. He was awarded the Sidney J. Levy Teaching Award in 1996, 1999, 2001, 2003, 2006, 2008, 2010, and 2012.

He is a research associate with the National Bureau of Economic Research (NBER) and has been an Associate Editor of the Journal of Finance and the Review of Financial Studies. He was formerly on the Board of Directors of LR Nelson and Moody’s Academic Advisory Research Committee. He currently serves as strategic advisor to OCA Ventures. He received his Ph.D. in Economics from the Massachusetts Institute of Technology. 

Professor Mitchell A. Petersen

 

 

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