Dodging Repatriation Tax: Evidence from the Domestic Mergers and Acquisitions Market

56 Pages Posted: 28 Jan 2015 Last revised: 10 Jul 2015

See all articles by Xiumin Martin

Xiumin Martin

Washington University in Saint Louis - Olin School of Business

MaryJane Rabier

Washington University in St. Louis

Emanuel Zur

University of Maryland - Robert H. Smith School of Business

Date Written: June 1, 2015

Abstract

U.S. multinational corporations (MNCs) pay taxes upon repatriation of foreign earnings. This paper investigates whether MNCs facing higher repatriation tax costs are more likely to engage in tax avoidance strategies involving domestic acquisitions. We find that MNCs with higher levels of repatriation tax costs are more likely to engage in both domestic and foreign acquisitions. Furthermore, the positive association between repatriation tax costs and the likelihood of domestic acquisitions is driven by stock-financed acquisitions, and strong corporate governance strengthens this positive relationship. Our findings suggest that domestic acquisitions are a prevalent way for MNCs to access cash trapped overseas.

Keywords: multinational corporations, repatriation, Tax, M&A

Suggested Citation

Martin, Xiumin and Rabier, MaryJane and Zur, Emanuel, Dodging Repatriation Tax: Evidence from the Domestic Mergers and Acquisitions Market (June 1, 2015). Robert H. Smith School Research Paper No. RHS 2556519. Available at SSRN: https://ssrn.com/abstract=2556519 or http://dx.doi.org/10.2139/ssrn.2556519

Xiumin Martin (Contact Author)

Washington University in Saint Louis - Olin School of Business ( email )

Saint Louis, MO 63130
United States

MaryJane Rabier

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Emanuel Zur

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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