Havenly Acquisitions

Col, Burcin; Errunza, Vihang R.

doi:10.2139/ssrn.2392057

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Havenly Acquisitions

Pace University Finance Research Paper No. 2015/01

42 Pages Posted: 8 Feb 2014 Last revised: 27 Aug 2019

See all articles by Burcin Col

Burcin Col

Pace University-Lubin School of Business

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Date Written: May 1, 2015

Abstract

We explore the valuation, tax and post-merger performance consequences of M&As with tax haven firms. Using an international sample of cross-border mergers over the period 1989 to 2010, we find that acquirers of tax haven firms decrease their effective tax rates significantly in two years following the M&As. The announcement returns to acquirers of tax haven firms are, on average positive but lower relative to a control sample of non-tax motivated M&As. Lower returns are associated with potential agency costs, taxpayer/consumer backlash as well as relatively poor operating and sales performance of the acquirers following these acquisitions.

Keywords: Tax haven, cross-border mergers, tax avoidance, corporate governance

JEL Classification: G3, H2, G34, G38, H26

Suggested Citation: Suggested Citation

Col, Burcin and Errunza, Vihang R., Havenly Acquisitions (May 1, 2015). Pace University Finance Research Paper No. 2015/01, Available at SSRN: https://ssrn.com/abstract=2392057 or http://dx.doi.org/10.2139/ssrn.2392057