Taxes, Financial Reporting Standards and the Role of Information Asymmetry in the Structuring of Cross-Border Mergers and Acquisitions
University of Saskatchewan
affiliation not provided to SSRN
January 1, 2011
2011 American Accounting Association Annual Meeting - Tax Concurrent Sessions
We study the effect of high quality financial standards and shareholder-level capital gains taxes on the structuring of cross-border mergers and acquisitions. Using 5,837 M&A transaction across a 16-year period, we find that higher shareholder capital gains tax rates lead to increased use of tax-free share-for-share exchanges. Consistent with theory, the role of shareholders’ tax incentives are mitigated by increased information asymmetry in cross-border transactions. However, we find evidence that higher quality financial reporting standards reduce this information asymmetry allowing more tax efficient cross-border transactions.
Number of Pages in PDF File: 26
Date posted: August 5, 2011 ; Last revised: August 26, 2011