Abstract

https://ssrn.com/abstract=2191544
 
 

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Does Target Tax Aggressiveness Matter in Corporate Takeovers?


Xiumin Martin


Washington University in Saint Louis - Olin School of Business

Cong Wang


China Europe International Business School (CEIBS)

Hong Zou


Faculty of Business and Economics, University of Hong Kong



Abstract:     
We examine whether tax avoidance of target firms affects takeover pricing. We find that acquirers pay lower premiums to tax aggressive targets. This effect is concentrated in acquisitions of opaque targets and targets operating in less competitive industries, and in acquisitions in which the acquirer hires a top-tier financial advisor. Tax aggressive targets are more likely to receive a downward adjustment to the initial offer price, and are more likely to be paid with acquirers’ stock. Overall, our evidence suggests that acquirers perceive tax aggressiveness of target firms as a contingent liability and adjust takeover price accordingly.

Number of Pages in PDF File: 44

Keywords: M&As, Tax aggressiveness, tax avoidance, due diligence, acquisition premium

JEL Classification: G32, G34, H26


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Date posted: December 21, 2012 ; Last revised: October 30, 2014

Suggested Citation

Martin, Xiumin and Wang, Cong and Zou, Hong, Does Target Tax Aggressiveness Matter in Corporate Takeovers?. Available at SSRN: https://ssrn.com/abstract=2191544 or http://dx.doi.org/10.2139/ssrn.2191544

Contact Information

Xiumin Martin (Contact Author)
Washington University in Saint Louis - Olin School of Business ( email )
Saint Louis, MO 63130
United States
Cong Wang
China Europe International Business School (CEIBS) ( email )
Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China
Hong Zou
Faculty of Business and Economics, University of Hong Kong ( email )
Hong Kong, AK HK
Hong Kong
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