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Havenly acquisitions

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  • Col, Burcin
  • Errunza, Vihang

Abstract

We explore the valuation, tax and post-merger performance consequences of M&As with tax haven firms. Using an international sample of cross-border mergers over the period 1989 to 2010, we find that acquirers of tax haven firms decrease their effective tax rates significantly in two years following the M&As. The announcement returns to acquirers of tax haven firms are, on average positive but lower relative to a control sample of non-tax motivated M&As. Lower returns are associated with potential agency costs, taxpayer/consumer backlash as well as relatively poor operating and sales performance of the acquirers following these acquisitions.

Suggested Citation

  • Col, Burcin & Errunza, Vihang, 2022. "Havenly acquisitions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:intfin:v:77:y:2022:i:c:s1042443121002079
    DOI: 10.1016/j.intfin.2021.101504
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    Cited by:

    1. Hussain, Tanveer & Loureiro, Gilberto, 2023. "Target industry takeover competition and the wealth effects of mergers and acquisitions: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    2. Devos, Erik & Rahman, Shofiqur, 2023. "Does labor unemployment insurance affect corporate tax aggressiveness?," International Review of Financial Analysis, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Tax haven; Cross-border mergers; Tax avoidance; Corporate governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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