TY  - JOUR
AU  - Auerbach,Alan J.
AU  - Reishus,David
TI  - The Effects of Taxation on the Merger Decision
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2192
PY  - 1990
Y2  - May 1990
UR  - http://www.nber.org/papers/w2192
L1  - http://www.nber.org/papers/w2192.pdf
N1  - Author contact info:
Alan J. Auerbach
Department of Economics
530 Evans Hall, #3880
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-0711
Fax: 510/643-0413
E-Mail: auerbach@econ.berkeley.edu

David Reishus
E-Mail: dreishus@lexecon.com
M1  - published as Alan J. Auerbach, David Reishus. "The Effects of Taxation on the Merger Decision," in Alan J. Auerbach, ed., "Corporate Takeovers: Causes and Consequences" University of Chicago Press (1988)

AB  - This paper presents estimates of the tax benefits generated by a sample of U.S. mergers and acquisitions involving two public corporations over the period 1968-83 and estimates a "marriage model" based on differences between these mergers and another sample of "pseudomergers" that did not occur to determine the impact of these tax benefits on the probability of two firms combining. Our findings reject the hypothesis that leverage played a large role in fostering these transactions, and that the tax losses and credits of acquired firms likewise exerted no impact on merger activity. Though the use of such benefits by acquiring firms to shield profits of other firms did increase the level of activity, the impact was quite small. On the whole, our results suggest that the changes in tax provisions with respect to mergers introduced by the Tax Reform Act of 1986 will have a small impact on U.S. mergers and acquisitions.
ER  -