Abstract

http://ssrn.com/abstract=2438003
 


 



Tax Benefit Preservation Plans


Thomas Jason Boulton


Miami University

Terry Nixon


Miami University

May 16, 2014


Abstract:     
We study the rise of shareholder right plans aimed at protecting a firm’s net operating loss carryforwards (tax benefit preservation plans). Traditional rights plans are designed to prevent hostile takeovers and have been found to entrench management at the expense of outside shareholders. Tax benefit preservation plans, however, have the potential to benefit shareholders by protecting a potentially valuable corporate asset. Using a sample of firms with publicly available information, we find that entrenchment concerns tend to outweigh the protection of net operating loss carryforwards when firms adopt tax benefit preservation plans. Specifically, we find that abnormal returns are negative at the announcement of a new tax benefit preservation plan. Additionally, firms with such a plan in place experience negative abnormal returns around the Delaware Courts’ decisions validating their use.

Number of Pages in PDF File: 37

Keywords: Delaware Courts, Net operating losses, Poison pill, Section 382, Shareholder rights plan

JEL Classification: G38, H25, K34

working papers series





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Date posted: May 18, 2014  

Suggested Citation

Boulton, Thomas Jason and Nixon, Terry, Tax Benefit Preservation Plans (May 16, 2014). Available at SSRN: http://ssrn.com/abstract=2438003 or http://dx.doi.org/10.2139/ssrn.2438003

Contact Information

Thomas Jason Boulton (Contact Author)
Miami University ( email )
Oxford, OH 45056
United States
(513) 529-1563 (Phone)
(513) 529-8598 (Fax)
Terry David Nixon
Miami University ( email )
Oxford, OH 45056
United States
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