Abstract
Federal income tax legislative reforms have broad impacts, affecting nearly every
person and business entity in the United States. Given the magnitude of these effects,
research is necessary to determine whether tax reforms affect firm value. Research has
been valuable in assessing the impacts of prior tax reform legislation. The present
research examines whether announcements regarding the passage of a recent change to
tax law, the Tax Cuts and Jobs Act of 2017 (TCJA), affected publicly traded firm value.
This research compares the stock return effects of dividend-paying and non-dividend
paying corporations, high-dividend and low-dividend paying corporations, and
multinational and U.S.-only corporations. Multiple-date event study methodology is
utilized to detect whether abnormal returns were present after announcements of the
TCJA’s passage. The researcher ran event studies using S&P 500 companies for various
dates significant to the TCJA’s passage through Congress. The results of the event studies
provide substantial support to answer that question with a clear affirmative. The
researcher finds support for the alternative hypothesis: that the TCJA of 2017 had a
positive impact on firm value.