THE EFFECTS OF TAXATION ON THE LOCATION DECISION OF MULTINATIONAL FIRMS: M&amp;A VERSUS GREENFIELD INVESTMENTS

Hebous, Shafi k; Ruf, Martin; Weichenrieder, Alfons J.

doi:10.17310/ntj.2011.3.03

Cited by 67 publications

(43 citation statements)

References 28 publications

(27 reference statements)

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“…As prior literature has shown, the target country tax rate has a significant impact on target acquisition (see, e.g., Hebous et al (2011), Arulampalam et al (2017), Herger et al (2016)). Therefore, we start our analysis with T AX noPS , i.e., with the assumption of no profit shifting, where profits are taxed in the target country and not shifted to a tax haven subsidiary.…”

Section: Based Onmentioning

confidence: 98%

“…While a few studies investigate the effect of acquirers' taxation systems on M&A activity, they focus only on foreign dividends taxation. Further, the M&A studies by Hebous et al (2011), Arulampalam et al (2017) and Herger et al (2016) find that the corporate tax rate of a potential target has a negative effect on its actual acquisition; however, these studies focus only on the target corporate tax rate and, consequently, do not allow policy implications to be drawn on how to design the taxation system of the acquirer's residence country. Additionally, to our knowledge, our study is the first to analyze the impact of capital gains taxation at the acquirer level on M&A prices.…”

Section: Introductionmentioning

confidence: 99%

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International Taxation and M&A Prices

Hagen

Pönnighaus

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. http://ftp.zew.de/pub/zew-docs/dp/dp17040.pdf Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar. Terms of use: Documents inDis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Abstract: We show that corporate taxation systems regarding foreign dividends and capital gains across 49 countries differ in many aspects, contradicting the requirements for capital ownership neutrality and indicating that ownership patterns are distorted. Consequently, a national tax policy maker may ask which taxation system improves the position of its multinational entreprises in bidding for foreign targets. To address this question, we develop a theoretical model on the impact of foreign dividends and capital gains taxation on cross-border M&A prices from the acquirer's perspective and theoretically compare different taxation systems. In a next step, we empirically validate our model in a regression analysis on a large cross-border M&A data set. Based on this analysis, we find that foreign dividends taxation rather than capital gains taxation impacts M&A prices. Finally, we provide tax policy suggestions. International Taxation and M&A Prices

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Section: Based Onmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

International Taxation and M&A Prices

Hagen

Pönnighaus

2017

SSRN Journal

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“…A second strand of the literature examines the impact of taxation on FDI location decisions (Devereux and Griffith, 1998b;Hebous et al 2011;Barrios et al 2012;Law-11 A number of firms in our sample are engaged in activities which would not be classified as shadow banking activities. For example, according to Broos et al (2012), the majority of the OFI sector in the Netherlands are not engaged in financial intermediation.…”

Section: The Non-bank Financial Sectormentioning

confidence: 99%

Location decisions of non‐bank financial foreign direct investment: Firm‐level evidence from Europe

Davies

Killeen

2017

Rev International Economics

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The non-bank financial sector in the euro area has more than doubled in size over the last decade reflecting the substantial growth in shadow banking activities. However, a large proportion of the non-bank financial sector remains unmapped as granular balance sheet information is not available for almost half of the sector. Motivated by these data gaps and employing firm-level data, this paper examines the location decisions of newly incorporated foreign affiliates in the non-bank financial sector across 27 European countries over the period 2004 to 2012. The probability of a country being chosen as the location for a new foreign affiliate is found to be negatively associated with higher corporate tax rates and geographic distance but increases with the size and financial development of the host country. The financial regulatory regime in the host country and gravity related controls such as the home and host country sharing a common legal system, language, border and currency are also found to impact the likelihood of non-bank financial FDI.JEL classification: F23, F65, G23, G32.

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“…They also stated that the likelihood of parent firm location in a country following a foreign takeover is abridged by high double taxation of border-crossing source income. Similarly, Hebous, Ruf, and Weichenrieder (2011) examined the impact of differences in cross-border tax rates with respect to the location for a subsidiary of MNC.…”

Section: (D) Tax and Taxation Issuesmentioning

confidence: 99%

Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

Reddy

2015

SSRN Journal

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The purpose of this paper is to review and summarize earlier studies analyzing the determinants of cross-border mergers and acquisitions (M&As). We primarily describe the motives of cross-border acquisitions and present the market performance for corporate control transactions over the period 1994-2013. Then, we illustrate the factors affecting cross-border investments and acquisitions in various taxonomies, namely deal-specific factors, firm-and industry-specific attributes, organizational learning and prioracquisition experience, and country-specific factors. We draw special attention to the country-specific taxonomy for various reasons include economic and financial markets environment, institutional and regulatory framework, political situation (including corruption), tax system, accounting and valuation matters, geographical factors and cultural issues. We also provide a synopsis of earlier studies addressing the diversification motive in M&A decision. We thus propose that a host-country's institutional laws and regulatory system, accounting and tax provisions, economic performance, financial markets development, investor protection, geographical, political and cultural factors distinctly affect cross-border acquisition's completion. Lastly, we outline contemporary issues in M&A research, and suggest promising areas for future exploration. JEL Classification: G34

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THE EFFECTS OF TAXATION ON THE LOCATION DECISION OF MULTINATIONAL FIRMS: M&A VERSUS GREENFIELD INVESTMENTS

Cited by 67 publications

References 28 publications

International Taxation and M&A Prices

International Taxation and M&A Prices

Location decisions of non‐bank financial foreign direct investment: Firm‐level evidence from Europe

Determinants of Cross-Border Mergers and Acquisitions: A Comprehensive Review and Future Direction

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