Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94350
Authors: 
Scheuering, Uwe
Year of Publication: 
2014
Series/Report no.: 
ZEW Discussion Papers 14-019
Abstract: 
The deductibility of interest expenses from the corporate tax base creates an incentive for acquiring companies to finance a takeover with debt. In this paper, I investigate the impact of profit taxation on the financing decision in corporate acquisitions for the first time for a sample of different acquirer-countries mainly in Europe. The likelihood to observe a debt-financed acquisition is found to increase in the acquirer's tax rate. In addition, I take into account that the financing decisions of particular acquisitions might not be independent from other investment decisions. Therefore, I analyze the acquirer's capital structure development around the acquisition and find an increase in the statutory tax rate by one %-point to be associated with a stronger increase in the debt ratio by 0.55 %-points during the acquisition period.
Subjects: 
M&A
Business Taxation
Capital Structure
Empirical Analysis
JEL: 
G34
H25
H32
Document Type: 
Working Paper

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