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Jake Smith, PhD

Financial Economist
U.S. Securities and Exchange Commission

I am a financial economist at the U.S. Securities and Exchange Commission. I received a Ph.D. in Finance from The University of Texas at Dallas, a M.S. from the University of South Florida, and a B.S. from the University of South Florida Sarasota-Manatee. My research spans a variety of topics in empirical corporate finance, including mergers and acquisitions, corporate taxation, and climate finance.

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CV | Email | Google Scholar | SSRN

Home: About Me

Working Papers

The Tax Benefits of Acquired Versus Organic Tax-Haven Subsidiaries

(previously titled "Tax Avoidance through Cross-Border Mergers and Acquisitions")

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with Jean-Marie Meier and Sorabh Tomar

Revise and resubmit, Journal of Accounting Research

Abstract

Does a firm’s route into a tax haven affect the tax savings generated? For U.S. firms, forming a haven subsidiary via a “haven acquisition” is associated with a 3.8 percentage point reduction in the cash effective tax rate. In contrast, the reduction is 1.4 percentage points when the haven subsidiary is formed organically. Haven acquisitions that generate greater economic substance in tax havens yield larger tax savings. For non-U.S. firms, haven acquisitions reduce the cash effective tax rate more when the home country scores higher on proxies for government quality and the enforcement of securities laws is weaker. M&A announcement returns show that investors price the expected tax savings of haven acquisitions into stock prices, helping to rule out alternative explanations. Overall, our findings suggest that separately considering haven acquisitions is important when analyzing tax minimization strategies involving tax havens.

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Conference Presentations

  • Financial Intermediation Research Society Conference, Berlin

  • Seventh Annual M&A Research Centre Conference, London

  • Fifth Edinburgh Corporate Finance Conference, Edinburgh

  • 2022 ZEW Public Finance Conference, Mannheim

  • Paris December 2021 Finance Meeting, online

  • 2021 FOM Conference, Hanover

  • 7th IWH-FIN-FIRE Workshop on "Challenges to Financial Stability," Halle (Saale)

  • China International Conference in Finance 2021, Shanghai

  • SFS Cavalcade 2021, online

  • Midwest Finance Association 2021, online

  • Journal of Law, Finance, and Accounting 2020, online

  • European Economic Association 2020, online

  • 10th EIASM Conference on Current Research in Taxation, online

Improving the Measurement of Tax Residence: Implications for Research on Corporate Taxation

with Jean-Marie Meier

Abstract

We highlight an opportunity for improved measurement of a key data item in corporate tax research, a firm’s tax residence. Some countries define tax residence based on a firm’s location of incorporation, some on a firm’s location of headquarters, and some consider both locations. Because no firm-level tax residence database exists, studies typically apply a uniform assignment of either the location of incorporation, headquarters, or center of business activity. We use a novel algorithm that embeds the residency laws of 150 countries to accurately assign tax residence. We reassign the tax residence of a considerable fraction of firms relative to standard proxies, and provide evidence that reassignment significantly affects inferences. For instance, for cross-border mergers and acquisitions with a US acquiror, 25% of the deal value involves a firm that is reassigned. Moreover, reassigned firms are systematically different from other firms along several dimensions, including effective tax rates.

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Award

  • Best Paper in Corporate Finance at the SFS Cavalcade North America 2023

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Research Grant

  • $15,000 from the International Tax Policy Forum

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Conference Presentations

  • Max Planck Institute for Tax Law and Public Finance Conference on "The Division of Tax Revenue in a Globalized World," Berlin

  • NTA's 116th Annual Conference on Taxation, Denver

  • 79th Annual Congress of the International Institute of Public Finance, Logan

  • SFS Cavalcade 2023, Austin 

  • 12th EIASM Conference on Current Research in Taxation, online

  • 12th Financial Markets and Corporate Governance Conference, online​​

The Outsized Role of Tax Havens in Mergers and Acquisitions

 with Jean-Marie Meier and Christoph Schneider

Abstract

Tax havens are used for tax minimization. Whether tax havens affect corporate control in the form of cross-border mergers and acquisitions (M&A) or are merely used as conduits between host and destination countries of (greenfield) foreign direct investment and portfolio investment is an open question. We provide new stylized facts through the first comprehensive analysis of cross-border, tax-haven mergers and acquisitions (M&A). Using novel tax residence data, we investigate 17,833 such transactions from 1990 to 2017, totaling $7.0 trillion in deal value, or 31% of cross-border M&A volume. $4.0 of the $7.0 trillion exceeds our prediction based on a gravity model with economic fundamentals. Small havens such as Bermuda alone make up $2.2 trillion or 10% of cross-border M&A volume.

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Conference Presentations

  • NTA's 118th Annual Conference on Taxation, Boston (scheduled)

  • 31st Annual Meeting of the German Finance Association, Hagen

Home: Projects

Climate Change Salience and Firm Investment

Abstract

I hypothesize that firms are more likely to make investments that reduce their CO2 emissions intensity if the threat of climate change is more salient. To test this, I examine mergers and acquisitions (M&A) in the US from 2012-2021 and exploit exogenous variation in exposure to abnormally warm temperatures. Conditional on an M&A occurring, if the acquiror experienced abnormally warm temperatures at its headquarters within 6 months prior to the deal’s announcement, then the target has 15% lower estimated CO2 emissions intensity in the full sample of deals. The effect increases to 29% among deals where the acquiror has above median CO2 emissions intensity, as these are the types of firms most exposed to climate change transition costs. This paper shows that firms exhibit a behavioral bias known as attribute substitution in their adjustment to climate change, since they make an estimate of the impact based on local temperatures, an easily accessible proxy, rather than the true determining factors.

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Awards

  • Second Prize for the Best Paper in Accounting and Corporate Finance at the Research Symposium on Finance and Economics

  • Runner-up for the best PhD paper in the category of Corporate Governance & Social Responsibility at the 13th Financial Markets and Corporate Governance Conference

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Conference Presentations

  • Research Symposium on Finance and Economics, online

  • 13th Financial Markets and Corporate Governance Conference, online

The COVID-19 Bailouts

with Jean-Marie Meier

Published as a pre-print in Covid Economics, Issue 83, 2 July 2021.

Abstract

We use hand-collected data to investigate the COVID-19 bailouts for all publicly listed US firms. The median tax rate is 4% for bailout firms and 16% for no-bailout firms. The bailouts are expensive when compared to past corporate income tax payments of the bailout firms. We compute the number of years a bailout recipient has to pay corporate income tax to generate as much tax revenue as it received in bailouts: 135.0 years for the Paycheck Protection Program and 267.9 years for the airline bailouts. We also document a dark side of the bailouts. For many firms, the bailouts appear to be a windfall. Numerous bailout recipients made risky financial decisions, so bailing them out might induce moral hazard. Moreover, lobbying expenditures positively predict bailout likelihood and amount.​

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