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International Taxation and the Direction and Volume of Cross‐Border M&As

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  • HARRY P. HUIZINGA
  • JOHANNES VOGET

Abstract

We show that the parent‐subsidiary structure of multinational firms created by cross‐border mergers and acquisitions is affected by the prospect of international double taxation. Specifically, the likelihood of parent firm location in a country following a cross‐border takeover is reduced by high international double taxation of foreign‐source income. At the same time, countries with high international double taxation attract smaller numbers of parent firms. A unilateral elimination of worldwide taxation by the United States is simulated to increase the proportion of parent firms locating in the United States following cross‐border mergers and acquisitions from 53% to 58%.

Suggested Citation

  • Harry P. Huizinga & Johannes Voget, 2009. "International Taxation and the Direction and Volume of Cross‐Border M&As," Journal of Finance, American Finance Association, vol. 64(3), pages 1217-1249, June.
    • Handle: RePEc:bla:jfinan:v:64:y:2009:i:3:p:1217-1249
    DOI: 10.1111/j.1540-6261.2009.01463.x
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    References listed on IDEAS

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    1. Benjamin C. Ayers & Craig E. Lefanowicz & John R. Robinson, 2003. "Shareholder Taxes in Acquisition Premiums: The Effect of Capital Gains Taxation," Journal of Finance, American Finance Association, vol. 58(6), pages 2783-2801, December.
    2. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-1094, December.
    3. James R. Hines & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 149-182.
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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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