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International Taxation and M&A Prices
Hagen, Dominik von
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Pönnighaus, Fabian Nicolas
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Document Type:
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Conference presentation
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Year of publication:
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2017
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Conference title:
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AAA Annual Meeting 2017
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Location of the conference venue:
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San Diego, CA
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Date of the conference:
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4.-9. August 2017
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Publication language:
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English
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Institution:
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Business School > ABWL u. Betriebswirtschaftliche Steuerlehre (Schreiber)
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Subject:
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330 Economics
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Classification:
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JEL:
F23 , G34 , H25 , H26 , H32 , H73,
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Keywords (English):
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International taxation , Repatriation taxes , Capital gains taxes , Lock-in effect , Multinational entities , Cross-border M&As
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Abstract:
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We show that the taxation systems regarding foreign dividends and capital gains across 49 countries differ in many aspects, contradicting the requirements for Capital Ownership Neutrality (CON) and indicating that ownership patterns are distorted. Consequently, a national tax policy maker may ask which taxation system improves the position of its MNEs in bidding for foreign targets. To address this question, we develop a theoretical model on the impact of foreign dividends and capital gains taxation on cross-border M&A prices from the acquirer’s perspective and theoretically compare different taxation systems. In a next step, we empirically validate our model in a regression analysis on a large cross-border M&A data set. Based on this analysis, we find that foreign dividends taxation rather than capital gains taxation drives M&A prices. Finally, we provide tax policy suggestions.
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