M&A and the tax benefits of debt-financing


Scheuering, Uwe


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URL: https://ub-madoc.bib.uni-mannheim.de/36583
URN: urn:nbn:de:bsz:180-madoc-365834
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: ZEW Discussion Papers
Volume: 14-019
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G34 , H25 , H32,
Keywords (English): M&A , business taxation , capital structure , empirical analysis
Abstract: The deductibility of interest expenses from the corporate tax base creates an incentive for acquiring companies to finance a takeover with debt. In this paper, I investigate the impact of profit taxation on the financing decision in corporate acquisitions for the first time for a sample of different acquirer-countries mainly in Europe. The likelihood to observe a debt-financed acquisition is found to increase in the acquirer's tax rate. In addition, I take into account that the financing decisions of particular acquisitions might not be independent from other investment decisions. Therefore, I analyze the acquirer's capital structure development around the acquisition and find an increase in the statutory tax rate by one %-point to be associated with a stronger increase in the debt ratio by 0.55 %-points during the acquisition period.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Scheuering, Uwe (2014) M&A and the tax benefits of debt-financing. Open Access ZEW Discussion Papers Mannheim 14-019 [Working paper]
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