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Merger policy and tax competition: the role of foreign firm ownership

Listed author(s):
  • Andreas Haufler

    ()

  • Christian Schulte

    ()

In many situations, governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes and firms may be partly owned by foreigners. We find that when foreign firm ownership is low in the pre-merger situation, non-cooperative tax policies are more efficient after a national merger, and smaller synergy effects are needed for this type of merger to be proposed and cleared. In contrast, cross-border mergers dominate when the degree of foreign firm ownership is high initially. These results suggest a link between increasing international portfolio diversification and the rising share of cross-border mergers.

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File URL: http://hdl.handle.net/10.1007/s10797-010-9149-5
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 18 (2011)
Issue (Month): 2 (April)
Pages: 121-145

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Handle: RePEc:kap:itaxpf:v:18:y:2011:i:2:p:121-145
DOI: 10.1007/s10797-010-9149-5
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