Acquisitiveness and Corporate Tax Avoidance

36 Pages Posted: 22 Aug 2016 Last revised: 15 Aug 2017

See all articles by Ferdinand A. Gul

Ferdinand A. Gul

Deakin University - Department of Accounting

Mehdi Khedmati

Monash University

Syed Shams

University of Southern Queensland

Date Written: August 18, 2016

Abstract

In this paper, we test whether firms that undertake aggressive merger and acquisition (M&A) decisions are likely to be associated with more tax avoidance. Our findings show that firms that engage in M&A perform more tax avoidance than firms that do not make an acquisition announcement. We argue that managers who invest large dollar values in acquisitions are expected to engage in more tax avoidance practices. Using a takeover sample, we determine that highly acquisitive firms exhibit higher tax avoidance activities compared to less acquisitive firms. We also determine that large and frequent acquisition decisions deteriorate firm value in the long run, which is consistent with the view that acquisitive managers implement higher tax avoidance strategies to pursue their self-serving objectives.

Keywords: Mergers and Acquisitions, Acquisitiveness, Tax Avoidance, Deal Value, Number of Mergers and Acquisitions

JEL Classification: G32, G34

Suggested Citation

Gul, Ferdinand A. and Khedmati, Mehdi and Shams, Syed, Acquisitiveness and Corporate Tax Avoidance (August 18, 2016). Available at SSRN: https://ssrn.com/abstract=2826218 or http://dx.doi.org/10.2139/ssrn.2826218

Ferdinand A. Gul

Deakin University - Department of Accounting ( email )

Melbourne
Australia

Mehdi Khedmati

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Syed Shams (Contact Author)

University of Southern Queensland ( email )

Sprinfield
Springfield
Springfield, Queensland 4300
Australia
+61734704551 (Phone)

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