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M&A and the Tax Benefits of Debt Financing

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  • Scheuering, Uwe

Abstract

I analyze the e ffects of profi t taxation on the fi nancing decision of corporate acquisitions. The deductibility of interest expenses from the corporate tax base creates an incentive for acquiring companies to fi nance a takeover with debt. Regarding the particular decision how to finance the considered deals results are not robust but looking at the whole capital structure development of acquirers I fi nd that an increase of the statutory tax rate by one %-point is associated with an increase of the debt ratio by 0.57 %-points during the acquisition period. --

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79817.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79817

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