In a note titled “U.S. Corporations’ Repatriation of Offshore Profits“, Fed studied how companies used the cash holdings outside the US after the Tax Cuts and Jobs Act. Under the new act, tax disincentives on the repatriation of foreign earnings were eliminated. Fed found that US firms repatriated just over USD 300B in Q1 2018, roughly 30% of the estimated stock of offshore cash holdings. However, funds repatriated in Q1 have been associated with a dramatic increase in share buybacks only. And, evidence of an increase in investment is less clear at this stage.
After the passage of the TCJA, hare buybacks spiked dramatically for the top 15 cash holders, which accounted for roughly 80% of total offshore cash holdings.
However, there is no obvious spike in investment among the top 15 cash holders in Q1 relative to the previous quarter.
And, the top 15 cash holders were net sellers in 2018:Q1, with their total securities holdings, mostly in US fixed-income securities, falling by about 3 percent of their total assets.
