Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81463
Authors: 
Norbäck, Pehr-Johan
Persson, Lars
Tåg, Joacim
Year of Publication: 
2010
Series/Report no.: 
IFN Working Paper 841
Abstract: 
Commentators on the private equity industry often claim that favorable tax treatment gives private equity firms advantages in the market for corporate control. But we show that tax advantages do not affect the equilibrium ownership of corporate assets when acquisition costs are fully deductible since buyers' valuations of assets are then independent of taxes. However, tax advantages are of importance under limited bidding competition, limited deductibility and in the presence of oligopolistic externalities in the product market. We also show that from an efficiency perspective, there are too many acquisitions in a double taxation system because acquisitions create deductions for buyers that are not available to sellers.
Subjects: 
Capital Gains Tax
Corporate Tax
Ownership Efficiency
Private Equity
Buyouts
LBOs
M&As
JEL: 
D20
F23
G18
H20
H25
H26
L10
L13
Document Type: 
Working Paper

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