International Taxation and Takeover Premiums in Cross-Border M&As

46 Pages Posted: 7 Feb 2008

See all articles by Harry Huizinga

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Johannes Voget

University of Mannheim - Accounting and Taxation

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2008

Abstract

Cross-border M&As can trigger a higher international taxation of the target's income. Non-resident dividend withholding taxes may be imposed by the target country, while additional corporate income taxation can be imposed by the acquiring country. This paper examines how these additional tax liabilities affect takeover premiums and thus the gains to target shareholders. Our evidence suggests that takeover premiums fully reflect non-resident dividend withholding taxes, while they reflect corporate income taxation by the acquiring country less than fully. The incidence of non-resident withholding taxation thus appears to be entirely on target shareholders. Hence, withholding taxes do not seem to serve the purpose of taxing foreign acquirers. This evidence is consistent with previous findings that the gains of M&As primarily accrue to target shareholders.

Keywords: international taxation, takeover premiums

JEL Classification: F23, G34

Suggested Citation

Huizinga, Harry and Voget, Johannes and Wagner, Wolf, International Taxation and Takeover Premiums in Cross-Border M&As (February 2008). Available at SSRN: https://ssrn.com/abstract=1091115 or http://dx.doi.org/10.2139/ssrn.1091115

Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Johannes Voget

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

Wolf Wagner (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
232
Abstract Views
1,178
rank
131,425
PlumX Metrics