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International Taxation and Takeover Premiums in Cross-border M&As

Author

Listed:
  • Harry Huizinga

    (Tilburg University, CEPR)

  • Johannes Voget

    (Oxford University Centre for Business Taxation)

  • Wolf Wagner

    (Tilburg University)

Abstract

Cross-border M&As can trigger a higher international taxation of the target’s income. Non-resident dividend withholding taxes may be imposed by the target country, while additional corporate income taxation can be imposed by the acquiring country. This paper examines how these additional tax liabilities affect takeover premiums and thus the gains to target shareholders. Our evidence suggests that takeover premiums fully reflect non-resident dividend withholding taxes, while they reflect corporate income taxation by the acquiring country less than fully. The incidence of non-resident withholding taxation thus appears to be entirely on target shareholders. Hence, withholding taxes do not seem to serve the purpose of taxing foreign acquirers. This evidence is consistent with previous findings that the gains of M&As primarily accrue to target shareholders.

Suggested Citation

  • Harry Huizinga & Johannes Voget & Wolf Wagner, 2008. "International Taxation and Takeover Premiums in Cross-border M&As," Working Papers 0809, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:0809
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    References listed on IDEAS

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    Cited by:

    1. Shafik Hebous & Martin Ruf & Alfons J. Weichenrieder, 2010. "The Effects of Taxation on the Location Decision of Multinational Firms: M&A vs. Greenfield Investments," CESifo Working Paper Series 3076, CESifo Group Munich.
    2. Hebous, Shafik & Ruf, Martin & Weichenrieder, Alfons J., 2011. "The Effects of Taxation on the Location Decision of Multinational Firms: M&a Versus Greenfield Investments," National Tax Journal, National Tax Association, vol. 64(3), pages 817-838, September.

    More about this item

    Keywords

    International Taxation; takeover premiums;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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