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

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 in...

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Bibliographic Details
Published in:The Journal of finance (New York) 2009-06, Vol.64 (3), p.1217-1249
Main Authors: HUIZINGA, HARRY P., VOGET, JOHANNES
Format: Article
Language:English
Subjects:
Acquisitions
Acquisitions & mergers
Business structures
Corporate finance
Corporate income taxes
Corporate taxation
Corporate taxes
Cross border transactions
Dividends
Double taxation
Estimated taxes
Income taxes
International taxation
Mergers
Multinational corporations
Multinational enterprises
Simulation
Studies
Tax exemptions
Tax rates
Taxation
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Summary: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%.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2009.01463.x