Taxes and Mergers: Evidence from Banks During the Financial Crisis

44 Pages Posted: 23 May 2018  

Albert H. Choi

University of Virginia School of Law

Quinn Curtis

University of Virginia School of Law

Andrew T. Hayashi

University of Virginia School of Law

Date Written: May 18, 2018

Abstract

At the peak of the financial crisis the IRS issued Notice 2008-83, administrative guidance that curtailed a tax rule designed to discourage tax-motivated acquisitions. The Notice increased the value to potential acquirors of tax assets of commercial banks that would have otherwise been impaired if the bank changed ownership. We find little evidence that the Notice affected bank merger activity, but we do find that mergers that occurred while the Notice was in effect had lower post-merger income growth. We also find evidence consistent with the strategic recognition of tax losses to exploit the benefits of the Notice.

Suggested Citation

Choi, Albert H. and Curtis, Quinn and Hayashi, Andrew T., Taxes and Mergers: Evidence from Banks During the Financial Crisis (May 18, 2018). Virginia Law and Economics Research Paper No. 2018-09; Virginia Public Law and Legal Theory Research Paper No. 2018-32. Available at SSRN: https://ssrn.com/abstract=3180731

Albert H. Choi (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Quinn Curtis

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

HOME PAGE: http://www.law.virginia.edu/lawweb/faculty.nsf/FHPbI/2298852

Andrew T. Hayashi

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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