Taxes and the Merger Decision: An Empirical Analysis
AbstractOne 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1855.
Date of creation: Mar 1986
Date of revision:
Publication status: published as Coffee, J., L. Lowenstein, and S. Rose-Ackerman (eds.) Knights, Raiders and Targets. New York, NY: Oxford University Press, 1988.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan J. Auerbach, 1980.
"Inflation and the Tax Treatment of Firm Behavior,"
NBER Working Papers
0547, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & James R. Hines Jr., 1986. "Tax Reform, Investment, and the Value of the Firm," NBER Working Papers 1803, National Bureau of Economic Research, Inc.
- Modén, Karl-Markus, 1989. "Taxes and Mergers in Sweden," Working Paper Series 242, Research Institute of Industrial Economics.
- Groh, Alexander P. & Henseleit, Christoph, 2009. "The valuation of tax shields induced by asset step-ups in corporate acquisitions," IESE Research Papers D/785, IESE Business School.
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