The impact of dividends and capital gains taxation on cross-border M&A prices

Hagen, Dominik von ; Pönnighaus, Fabian Nicolas

Document Type: Working paper
Year of publication: 2017
The title of a journal, publication series: SSRN Working Paper Series
Place of publication: Rochester, NY
Publishing house: SSRN
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre (Schreiber 1999-2019)
Subject: 330 Economics
Keywords (English): International taxation , Repatriation taxes , Capital gains taxes , Lock-in effect , Multinational entities , Cross-border M&As
Abstract: We show that the taxation systems regarding foreign dividends and capital gains across 49 countries differ in many aspects, contradicting the requirements for Capital Ownership Neutrality (CON) and indicating that ownership patterns are distorted. Consequently, a national tax policy maker may ask which taxation system improves the position of its MNEs in bidding for foreign targets. To address this question, we develop a theoretical model on the impact of foreign dividends and capital gains taxation on cross-border M&A prices and theoretically compare different taxation systems. In a next step, we empirically validate our model in a regression analysis on a large cross-border M&A data set. Based on this analysis, we find that foreign dividends taxation rather than capital gains taxation drives M&A prices. Finally, we provide tax policy suggestions.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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