Working Paper: CEPR ID: DP7182
Authors: Harry Huizinga; Johannes Voget; Wolf Wagner
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. Our evidence suggests that takeover premiums fully reflect non-resident dividend withholding taxes, while there is some evidence that they reflect corporate income taxation by the acquiring country as well. In contrast, acquiring firm stock market returns around the bid announcement do not appear to reflect either type of taxation. These results are consistent with previous findings that the gains of M&As primarily accrue to target shareholders.
Keywords: international taxation; takeover premiums
JEL Codes: F23; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonresident dividend withholding taxes (G35) | reduced international takeover premiums (G34) |
| corporate income taxes (G30) | reduced international takeover premiums (G34) |
| nonresident dividend withholding taxes (G35) | lower acquirer firm stock market returns (G34) |
| corporate income taxes (G30) | lower acquirer firm stock market returns (G34) |