Do Corporate Taxes Impede Merger and Acquisition Activity? Evidence from Private Corporations

51 Pages Posted: 11 Feb 2023

See all articles by Erin Henry

Erin Henry

University of Arkansas - Department of Accounting

Jennifer Luchs-Nunez

Colorado State University, Fort Collins - College of Business

Steven Utke

University of Connecticut - Department of Accounting

Date Written: February 9, 2023

Abstract

We study the effect of corporate taxes on mergers using tax stimulus acts that reduce corporate taxes for S corporations. S corporations generally face corporate tax on gains arising from the sale of the S corporation, or of its assets, if it was previously a C corporation. We fail to find consistent evidence that corporate tax reductions increase the likelihood of S corporation acquisition, but some evidence of acquisition price decrease. Overall, results suggest the tax changes did not achieve the desired goal of increased acquisition activity at an estimated cost to the government of $2.45 billion.

Keywords: S corporations; Corporate tax; Mergers; Asset sales; Tax policy; Lock-in effect; ARRA; ATRA; SBJA; PATH Act

JEL Classification: G34, H25, K34

Suggested Citation

Henry, Erin and Luchs-Nunez, Jennifer and Utke, Steven, Do Corporate Taxes Impede Merger and Acquisition Activity? Evidence from Private Corporations (February 9, 2023). Available at SSRN: https://ssrn.com/abstract=4352814 or http://dx.doi.org/10.2139/ssrn.4352814

Erin Henry (Contact Author)

University of Arkansas - Department of Accounting ( email )

Business Bldg. 454
Fayetteville, AR 72701
United States

Jennifer Luchs-Nunez

Colorado State University, Fort Collins - College of Business ( email )

Fort Collins, CO 80523
United States

Steven Utke

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

HOME PAGE: http://www.steveutkedata.com/

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