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Who bears the burden of international taxation? Evidence from cross-border M&As

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  • Huizinga, Harry
  • Voget, Johannes
  • Wagner, Wolf

Abstract

Cross-border M&As can trigger additional taxation of the target's income in the form of non-resident dividend withholding taxes and acquirer-country corporate income taxation. This paper finds that this additional international taxation is fully capitalized into lower takeover premiums. In contrast, acquirer excess stock market returns around the bid announcement date do not appear to reflect additional taxation of the target's income. These findings suggest that international taxation is considered to be burdensome and that the incidence of this taxation is primarily on target-firm shareholders.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 88 (2012)
Issue (Month): 1 ()
Pages: 186-197

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Handle: RePEc:eee:inecon:v:88:y:2012:i:1:p:186-197

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: International taxation; Takeover premium; Cross-border M&As;

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References

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Cited by:
  1. Salvador Barrios & Luc Laeven & Harry Huizinga & Gaetan Nicodeme, 2009. "International Taxation and Multinational Firm Location Decisions," Taxation Papers 16, Directorate General Taxation and Customs Union, European Commission, revised Apr 2009.

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