Date of Award

2026-08-01

Degree Name

Doctor of Philosophy

Department

Economics

Advisor(s)

Feixue Xie

Abstract

This dissertation comprises three chapters examining how political risk and tax enforcement shape corporate investment decisions and firm value. The first essay investigates how firm-level political risk affects investment efficiency among U.S. firms. Using 40,215 firm-year observations spanning 2002-2022 and exploiting the Hassan et al. (2019) political risk index as a firm-specific measure, we find that political risk reduces investment efficiency exclusively through underinvestment - a one-standard-deviation increase corresponds to approximately $5.7 million in foregone annual investment for a median firm. Mediation analysis confirms that precautionary cash hoarding accounts for 31.8% of the effect, establishing uncertainty - rather than capital scarcity - as the operative channel. Results are robust to two-stage least squares instrumentation, propensity score matching, and placebo tests.The second and third essays exploit the staggered adoption of addback statutes - state-level anti-avoidance provisions disallowing intercompany deductions - across 24 U.S. states as a quasi-natural experiment, employing a difference-in-differences design on 53,927 firm-year observations for 6,961 publicly traded firms from 1994 to 2021. The second essay documents that addback adoption reduces R&D investment by 8.9% and cash holdings by 1.3 percentage points, with 44.1% of the R&D reduction transmitted through cash depletion - consistent with an internal capital market mechanism. Effects are concentrated among large and poorly governed firms, while financially constrained firms exhibit attenuation consistent with active resource prioritization. The third essay establishes that addback adoption reduces Tobin's Q by 5.4% relative to the sample mean, with value effects deepening over time as investors progressively price the permanent consequences of enforcement-induced constraints. Collectively, these essays establish firm-level political risk and state tax enforcement as distinct but complementary external frictions on capital allocation, with meaningful implications for investment efficiency, innovation, and firm value.

Language

en

Provenance

Received from ProQuest

File Size

149 p.

File Format

application/pdf

Rights Holder

Obed Nana Buadi

Download

Share

COinS