Taxes, Financial Reporting Standards and the Role of Information Asymmetry in the Structuring of Cross-Border Mergers and Acquisitions

26 Pages Posted: 5 Aug 2011 Last revised: 26 Aug 2011

Devan Mescall

University of Saskatchewan

Christy MacDonald

affiliation not provided to SSRN

Date Written: January 1, 2011

Abstract

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.

Suggested Citation

Mescall, Devan and MacDonald, Christy, Taxes, Financial Reporting Standards and the Role of Information Asymmetry in the Structuring of Cross-Border Mergers and Acquisitions (January 1, 2011). 2011 American Accounting Association Annual Meeting - Tax Concurrent Sessions. Available at SSRN: https://ssrn.com/abstract=1905216 or http://dx.doi.org/10.2139/ssrn.1905216

Devan Mescall (Contact Author)

University of Saskatchewan ( email )

Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada

Christy MacDonald

affiliation not provided to SSRN ( email )

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