Welcome Home to Japan: Repatriation of Foreign Profits by Japanese Multinationals

The empirical literature suggests that repatriation decisions of U.S. multinational corporations are influenced by taxes. Although the U.S. and Japan adopt the same foreign tax credit system, we have found no evidence that corporate taxes have significantly affected dividend repatriation of Japanese multinationals. Instead, we have found that almost half of Japanese foreign affiliates pay dividends and their average marginal dividend payout rate is about twenty percent. The results also suggest that the repatriation behavior varies across industries and countries. Furthermore, parent companies' financial status is found to influence the profit remittance of their foreign affiliates.