IDEAS home Printed from https://ideas.repec.org/a/wly/coacre/v22y2005i1p1-30.html
   My bibliography  Save this article

Corporate Taxes and Financing Methods for Taxable Acquisitions

Author

Listed:
  • DAN S. DHALIWAL
  • KAYE J. NEWBERRY
  • CONNIE D. WEAVER

Abstract

We examine the influence of corporate taxes on U.S. firms' financing methods for taxable acquisitions of 100 percent of a target corporation's stock. We conduct tests of acquirer firms' use of debt or internal funds as the funding source for these acquisitions over the period 1987†97. Our results provide the first empirical evidence that U.S. firms' use of debt to fund acquisitions significantly declines as foreign tax credit limitations reduce the marginal tax benefits received from borrowing. This finding is consistent with earlier speculation that U.S. foreign tax credit provisions could materially affect the capital costs of U.S. companies in debt†financed acquisitions. We also find that these firms are generally high†tax†rate corporations whose financing choices are not significantly influenced by whether they acquire target†firm tax loss carryovers. Our findings contribute to the accounting literature on the influence of taxes on the structure and financing of corporate acquisitions.

Suggested Citation

  • Dan S. Dhaliwal & Kaye J. Newberry & Connie D. Weaver, 2005. "Corporate Taxes and Financing Methods for Taxable Acquisitions," Contemporary Accounting Research, John Wiley & Sons, vol. 22(1), pages 1-30, March.
    • Handle: RePEc:wly:coacre:v:22:y:2005:i:1:p:1-30
    DOI: 10.1506/N4CQ-JR8F-XLUC-M50W
    as

    Download full text from publisher

    File URL: https://doi.org/10.1506/N4CQ-JR8F-XLUC-M50W
    Download Restriction: no
    File URL: https://libkey.io/10.1506/N4CQ-JR8F-XLUC-M50W?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Taylor, Grantley & Richardson, Grant, 2014. "Incentives for corporate tax planning and reporting: Empirical evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(1), pages 1-15.
    2. Cristian Carini & Michele Moretto & Paolo M. Panteghini & Sergio Vergalli, 2020. "Deferred taxation under default risk," Journal of Economics, Springer, vol. 129(1), pages 33-48, January.
    3. HAMZA Taher & SGHAIER Adnène & THRAYA Mohamed Firas, 2016. "How Do Takeovers Create Synergies? Evidence From France," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 11(1), pages 54-72, April.
    4. Taylor, Grantley & Tower, Greg & Van Der Zahn, Mitch, 2011. "The influence of international taxation structures on corporate financial disclosure patterns," Accounting forum, Elsevier, vol. 35(1), pages 32-46.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:coacre:v:22:y:2005:i:1:p:1-30. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1911-3846 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.