Corporate tax cuts, merger activity, and shareholder wealth

• 成果类型: Article
• 署名作者: Blouin, Jennifer L.; Fich, Eliezer M.; Rice, Edward M.; Tran, Anh L.
• 署名单位: University of Pennsylvania; Drexel University; University of Washington; University of Washington Seattle; City St Georges, University of London
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2020.101315
• 发表日期: 2021
• 关键词: Financial constraints; foreign earnings; cash flow; INVESTMENT; gains; acquisitions; taxation; MARKET; firm; incentives

摘要

We study the impact of the Domestic Production Activities Deduction (DPAD) on mergers and acquisitions. DPAD reduces corporate tax rates on income from work or goods made in the U.S. Results indicate that the quantity and quality of acquisition bids by DPADadvantaged firms conform to the predictions of the neoclassical theory of the firm and the theory of financial constraints. Specifically, bids, particularly those cash-financed, increase substantially in industries with large DPAD-related tax cuts and for firms with financial constraints. Moreover, DPAD improves acquisition quality where acquirers and targets are likely to generate incremental DPAD tax benefits through their merger. ? 2020 Elsevier B.V. All rights reserved. We study the impact of the Domestic Production Activities Deduction (DPAD) on mergers and acquisitions. DPAD reduces corporate tax rates on income from work or goods made in the U.S. Results indicate that the quantity and quality of acquisition bids by DPADadvantaged firms conform to the predictions of the neoclassical theory of the firm and the theory of financial constraints. Specifically, bids, particularly those cash-financed, increase substantially in industries with large DPAD-related tax cuts and for firms with financial constraints. Moreover, DPAD improves acquisition quality where acquirers and targets are likely to generate incremental DPAD tax benefits through their merger.