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http://ssrn.com/abstract=2610
 
 

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The Role of Taxes, Financial Reporting, and Other Market Imperfections in Structuring Divisive Reorganizations


Andrew W. Alford


Goldman, Sachs & Co.

Philip G. Berger


University of Chicago - Booth School of Business

March 1996


Abstract:     
We examine the relative importance of taxes and nontax factors in explaining companies' decision to divest using a sale to a third party versus a spinoff to existing shareholders. We find that taxes outweigh financial reporting motives for unaggressive financial reporters, but that the two factors are weighted equally by aggressive reporters. This finding adds to the literature on firms' willingness to forsake tax benefits in order to increase reported income. Additional results indicate that funds constraints, buyer demand for the divested unit, and transaction costs of spinoffs also influence firms' restructuring behavior in ways that impede the use of spinoffs when they would reduce taxes.

JEL Classification: M41, G34, D23, L22

working papers series





Not Available For Download

Date posted: June 30, 1998  

Suggested Citation

Alford , Andrew W. and Berger, Philip G., The Role of Taxes, Financial Reporting, and Other Market Imperfections in Structuring Divisive Reorganizations (March 1996). Available at SSRN: http://ssrn.com/abstract=2610

Contact Information

Andrew W. Alford
Goldman, Sachs & Co. ( email )
85 Broad Street
New York, NY 10004
United States
212-902-0867 (Phone)
212-357-6563 (Fax)
Philip G. Berger (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-8687 (Phone)
773-834-4585 (Fax)
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