Institutional Affiliation: Compass Lexecon
NBER Working Papers and Publications
|March 1987||The Effects of Taxation on the Merger Decision|
with Alan J. Auerbach: w2192
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 provis...
Published: Corporate Takeovers: Causes and Consequences, edited by Alan J. Auerbach,pp. 157-183. Chicago: The University of Chicago Press, 1988.
|1987||The Impact of Taxation on Mergers and Acquisitions|
with Alan J. Auerbach
in Mergers and Acquisitions, Alan J. Auerbach, editor
|March 1986||Taxes and the Merger Decision: An Empirical Analysis|
with Alan J. Auerbach: w1855
One motive that is often cited for merger activity is the avoidance of federal income taxes by corporations and their shareholders. Yet there is little empirical evidence on the tax consequences of merger activity, or on the postmerger effects on firm policies of tax motivated mergers. In this paper, we present some initial results based on a large sample of mergers and acquisitions that occurred over the period 1968-83. We find that, in about one fifth of all mergers, there was a potential gain from the transfer of unused tax losses and credits, with an average value of approximately ten percent of the acquired company's market value. Other tax incentives to merge are also measured, but found to be less important quantitatively.
Published: Coffee, J., L. Lowenstein, and S. Rose-Ackerman (eds.) Knights, Raiders and Targets. New York, NY: Oxford University Press, 1988.