Discussion Paper Details

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Title: International Taxation and Takeover Premiums in Cross-border M&As

Author(s): Harry Huizinga, Johannes Voget and Wolf Wagner

Publication Date: February 2009

Keyword(s): international taxation and takeover premiums

Programme Area(s): Public Economics

Abstract: Cross-border M&As can trigger a higher international taxation of the target?s income. Non-resident dividend withholding taxes may be imposed by the target country, while additional corporate income taxation can be imposed by the acquiring country. Our evidence suggests that takeover premiums fully reflect non-resident dividend withholding taxes, while there is some evidence that they reflect corporate income taxation by the acquiring country as well. In contrast, acquiring firm stock market returns around the bid announcement do not appear to reflect either type of taxation. These results are consistent with previous findings that the gains of M&As primarily accrue to target shareholders.

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Bibliographic Reference

Huizinga, H, Voget, J and Wagner, W. 2009. 'International Taxation and Takeover Premiums in Cross-border M&As'. London, Centre for Economic Policy Research.