The Effects of Taxation on the Merger Decisions
Author | : Alan J. Auerbach |
Publisher | : |
Total Pages | : 37 |
Release | : 1987 |
Genre | : |
ISBN | : |
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Author | : Alan J. Auerbach |
Publisher | : |
Total Pages | : 37 |
Release | : 1987 |
Genre | : |
ISBN | : |
Author | : David Reishus |
Publisher | : |
Total Pages | : |
Release | : 1990 |
Genre | : |
ISBN | : |
This paper presents estimates of the tax benefits generated by a sample of U.S. mergers and acquisitions involving two public corporations over the period 1968-83 and estimates a "marriage model" based on differences between these mergers and another sample of "pseudomergers" that did not occur to determine the impact of these tax benefits on the probability of two firms combining. Our findings reject the hypothesis that leverage played a large role in fostering these transactions, and that the tax losses and credits of acquired firms likewise exerted no impact on merger activity. Though the use of such benefits by acquiring firms to shield profits of other firms did increase the level of activity, the impact was quite small. On the whole, our results suggest that the changes in tax provisions with respect to mergers introduced by the Tax Reform Act of 1986 will have a small impact on U.S. mergers and acquisitions.
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Total Pages | : |
Release | : 1987 |
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Author | : Alan J. Auerbach |
Publisher | : |
Total Pages | : 36 |
Release | : 1986 |
Genre | : Consolidation and merger of corporations |
ISBN | : |
One motive that is often cited for merger activity is the avoidance of federal income taxes by corporations and their shareholders. Yet there is little empirical evidence on the tax consequences of merger activity, or on the postmerger effects on firm policies of tax motivated mergers. In this paper, we present some initial results based on a large sample of mergers and acquisitions that occurred over the period 1968-83. We find that, in about one fifth of all mergers, there was a potential gain from the transfer of unused tax losses and credits, with an average value of approximately ten percent of the acquired company's market value. Other tax incentives to merge are also measured, but found to be less important quantitatively
Author | : Denis A. Breen |
Publisher | : |
Total Pages | : 106 |
Release | : 1987 |
Genre | : Consolidation and merger of corporations |
ISBN | : |
Author | : John Keith Butters |
Publisher | : |
Total Pages | : 392 |
Release | : 1951 |
Genre | : Consolidation and merger of corporations |
ISBN | : |
Author | : Eric Ohrn |
Publisher | : |
Total Pages | : 51 |
Release | : 2019 |
Genre | : |
ISBN | : |
Investor-level taxation may distort merger and acquisition decisions when capital gains are taxed at a preferable rate, relative to dividends. The intuition is that the value of a target's assets depends on whether the target is acquired. If it is acquired, then the firm's equity is taxed at the capital gains rate. If, instead, the target is not acquired, then eventually the equity will be distributed as dividends and taxed at the dividend tax rate. This tax discount means acquisitions have a tax preference, relative to dividend payments, for potential acquiring firms that pay dividends. As a result, the tax discount distorts the mergers and acquisitions of dividend-payers, leading them to do more and lower quality deals. To test for the existence and effects of this tax discount on merger and acquisition behavior, we exploit quasi-experimental variation created by the Jobs Growth and Tax Relief Reconciliation Act of 2003, which equalized dividend and capital gains rates, eliminating the tax discount. We find that acquiring firms with larger tax discounts before 2003 made higher quality acquisitions after the discount was eliminated. These results support the existence of a tax discount prior to 2003 and suggest that re-implementing the same wedge between dividend and capital gains rates would cause lower quality acquisitions that would destroy approximately $59 billion of the value of mergers and acquisitions in the United States annually.
Author | : Alfred H. R. Davis |
Publisher | : Ann Arbor, Mich. : University Microfilms International |
Total Pages | : 342 |
Release | : 1985 |
Genre | : Capital |
ISBN | : |
Author | : Alfred H. R. Davis |
Publisher | : |
Total Pages | : 344 |
Release | : 1985 |
Genre | : Consolidation and merger of corporations |
ISBN | : |
Author | : Alan J. Auerbach |
Publisher | : University of Chicago Press |
Total Pages | : 354 |
Release | : 2013-12-30 |
Genre | : Business & Economics |
ISBN | : 0226032167 |
The takeover boom that began in the mid-1980s has exhibited many phenomena not previously observed, such as hostile takeovers and takeover defenses, a widespread use of cash as a means of payment for targeted firms, and the acquisitions of companies ranking among the largest in the country. With the aim of more fully understanding the implications of such occurances, contributors to this volume consider a broad range of issues as they analyze mergers and acquisitions and study the takeoveer process itself.