42 Pages Posted: 8 Feb 2014 Last revised: 8 May 2015
Date Written: May 1, 2015
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
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