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A MARKKULA PERSPECTIVE ON THE MOTIVATIONS AND BEHAVIORS WHICH LEAD TO THE TRAPPED CASH PHENOMENON AND IMPLICATIONS FOR REGULATORS
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A MARKKULA PERSPECTIVE ON THE MOTIVATIONS AND BEHAVIORS WHICH LEAD TO THE TRAPPED CASH PHENOMENON AND IMPLICATIONS FOR REGULATORS
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Journal Article
A MARKKULA PERSPECTIVE ON THE MOTIVATIONS AND BEHAVIORS WHICH LEAD TO THE TRAPPED CASH PHENOMENON AND IMPLICATIONS FOR REGULATORS
2021
Overview
From 1973 to 2017, US multinational firms with foreign operations were able to avoid US tax on foreign earnings if those earnings were designated as permanently reinvested. Seeking to avoid tax liability and give the appearance of better performance, firms designated over 3 trillion USD as permanently reinvested. The behaviors and decisions of managers during this period afford researchers a glimpse into the ethical motivations of these managers. Analysis showed that rather than reinvesting those earnings into operations, much was used to fund suboptimal investments or held as cash, reducing tax revenues, stunting growth and reducing domestic liquidity. Managers with a short-term focus could use the PRE designation to make earnings appear higher in the current year, to the future detriment of the firm. This paper uses rational choice theory, self-serving bias and the Markkula framework to analyze earnings repatriation decisions, and conclude that self-serving bias led managers to act under the rights perspective of the Markkula framework, rather than the utilitarian, fairness, common good or virtue perspectives.
Publisher
Southern Academy of Legal Studies in Business
Subject
