The Effect of Taxes on the Structure of Corporate Acquisitions

This paper analyzes tax and non-tax determinants of corporate acquisition structure for 340 acquisitions involving public US acquirers and targets during 1985-1988. Prior studies of corporate acquisition method, which focused on target firm tax attributes and/or target shareholder capital gains tax...

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Veröffentlicht in:Journal of accounting research 1998-10, Vol.36 (2), p.279-298
1. Verfasser: Erickson, Merle
Format: Artikel
Sprache:eng
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Zusammenfassung:This paper analyzes tax and non-tax determinants of corporate acquisition structure for 340 acquisitions involving public US acquirers and targets during 1985-1988. Prior studies of corporate acquisition method, which focused on target firm tax attributes and/or target shareholder capital gains tax liabilities have had limited success in identifying the determinants of acquisition form. The acquiring firm is added to the analysis of the merger structure. This paper takes into account 3 contracting parties: acquiring firm, target firm and target shareholders. Results indicate that the probability of a debt-financed taxable cash transaction is an increasing function of the acquiring firm's debt-to-equity ratio, contrary to predictions of financial distress cost theories.
ISSN:0021-8456
1475-679X
DOI:10.2307/2491478