U.S. Worldwide Taxation and Domestic Mergers and Acquisitions

47 Pages Posted: 9 Mar 2017 Last revised: 8 Aug 2018

See all articles by Jeremiah Harris

Jeremiah Harris

Kent State University - College of Business Administration

William O'Brien

University of Illinois at Chicago

Date Written: August 6, 2018

Abstract

This study shows that domestic mergers and acquisitions (M&A) were inhibited by the U.S.’s worldwide tax policy on foreign-earned income. Double Irish structures, a complex web of subsidiaries that reduce foreign tax rates and therefore increase potential repatriation tax rates, are associated with lower levels of domestic M&A by U.S. firms. These results do not reflect a continuation of prior trends or declines in worldwide acquisitiveness and are robust to several econometric approaches. We suggest that the Double Irish variable mitigates a confounding effect in an alternative tax variable that clouds inferences in tests of repatriation taxes and domestic M&A.

Keywords: Acquisitions, Repatriation, Taxes

JEL Classification: F23, G34, G38, H21, H26

Suggested Citation

Harris, Jeremiah and O'Brien, William, U.S. Worldwide Taxation and Domestic Mergers and Acquisitions (August 6, 2018). Journal of Accounting & Economics (JAE), Vol. 66, No. 2-3, 2018, Available at SSRN: https://ssrn.com/abstract=2928987 or http://dx.doi.org/10.2139/ssrn.2928987

Jeremiah Harris

Kent State University - College of Business Administration ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States

William O'Brien (Contact Author)

University of Illinois at Chicago ( email )

601 S. Morgan St.
Chicago, IL 60607
United States

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